It was a tough four-day week for the markets as we had a bad Monday and Friday where markets fell sharply. Thursday was expiry day where benchmark indices were more or less flat but midcap and small cap gave way. At the end of it all it was a week which investors would like to forget in a hurry. BSESENSEX gained on two and lost on two sessions while NIFTY lost on all four trading sessions. BSESENSEX lost 2,112.96 points or 2.81% to close at 73,198.10 points while NIFTY lost 671.20 points or 2.94% to close at 22,124.70 points. The broader markets saw BSE100, BSE200 and BSE500 lose 3.38%, 3.55% and 3.81% respectively. BSEMIDCAP was down 4.41% while BSESMALLCAP lost 6.05%.
The Indian Rupee lost 79 paisa or 0.91% to close at Rs 87.49 to the US dollar. Dow Jones gained on three of the five sessions and lost on two. It gained 412.89 points or 0.95% to close at 43,840.91 points. The volatility in the US markets has increased significantly and this is becoming worrisome. At the end of Thursday the weekly change was negative with markets down cumulatively 187 points, and then on Friday the whole was reversed with Dow gaining 612 points. This kind of movement is worrisome and indicates that the underlying sentiment has a lot of fear lurking.
Thursday the 27th of February saw futures for February series expire. Bulls and bears held on to their position as markets went nowhere on that day with NIFTY losing a mere 2.5 points on expiry day. However, for the series the loss was 704.45 points or 3.03%. The series closed at 22,545.05 points.
On the primary market front, we had the listing of Quality Power Electrical Equipment Limited, which listed on Monday the 24th of February. The issue price was Rs 425. The share debuted at Rs 432.05 and closed on Monday at Rs 387.05, a loss of Rs 37.95 or 8.92%. By Friday, the share lost further ground and closed at Rs 376.55, a loss of Rs 48.45 or 11.38%. Very clearly the market in its present mood is very harsh on any IPO where the valuation is stretched. It does not spare anyone. If one were to look at the new issues which have listed in the last 10 weeks, of the 20 main board issues as many as half are in the red, which means below their issue price. This does not take into account the fall from their highs which was typically made immediately after listing over the next ten days or so.
In such a brutal market, one hopes and prays that merchant bankers are able to temper the expectations of promoters waiting on the sidelines to open their issues. Valuations have to be moderated, failing which the issues will meet a fate which no one desires or hopes for.
Markets are in a bad shape to say the least. While the fall from all-time highs made in September24 is a little over 15%, the impact is much more. New investors who joined the markets post covid beginning from March 2020 onwards, have never experienced a correction and that too one lasting over six months. This is a new learning and we are quite close to entering a bear market if the fall continues.
The new SEBI chief has been announced. Tuhin Kanta Pandey has assumed office as the SEBI Chairman. He is the 11th Chairman. Prior to his appointment he was the serving Finance Secretary. He was Secretary at DIPAM, which handles the divestment program of the Government of India. He understands Capital Markets and is not new to this important aspect of capital formation and markets. Expect SEBI to fire on all cylinders going forward.
Coming to the markets in the week ahead, expect volatility to continue. FPI selling has continued and the only reason for it to stop could be if markets in US start correcting. The sell India and buy China markets is currently on as the valuations in China are attractive but tending to neutralize as valuations rise. In India, one could see interest in the benchmark indices underlying stocks coming as they start becoming attractive to invest. Not suggesting a turnaround anytime soon, but just the thought. As far as midcap and small cap sectors are concerned, the valuations there need plenty to correct.
Support for the NIFTY is around the 21,800-21,850 level in the coming days and further lower around 21,200-21,300 levels. They seem far off, but in the present mood we need to have some back up as well. These levels would correspond to 72,00-72,150 on BSESENSEX and followed by 70,200-70,500 points. On the resistance front, we had lot of support at 22,800 on NIFTY which would act as very strong resistance corresponding to 75,200-75,300 points. The strategy would be to look for pockets of support in the benchmark indices and large cap basket only. As far as midcap and small cap stocks are concerned, one may begin an exercise of identifying quality growth stocks which have weathered the storm and corrected as well. Not hinting at buying, but just short listing.
In conclusion, trade cautiously and protect your capital.