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Markets to remain volatile with new high looking difficult currently

by Arun Kejriwal (Market veteran investor and Opinion Maker)
Jul 31, 2023
Markets to remain volatile with new high looking difficult currently, Market, KonexioNetwork.com

Markets had a roller coaster week and the wait to surmount Mount 20K on NIFTY has become that much distant and also tougher. The falling short on 20th July by 8.85 points is now 354 points away and it would need a superhuman effort to do it in a week. Markets gained on one day, lost on three and were flat on the fifth day. At the end of the week, BSESENSEX lost 524.06 points or 0.79% to close at 66,160.20 points while NIFTY lost 98.95 points or 0.50% to close at 19,646.05 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.15%, gain0.14% and 0.29% respectively. BSEMIDCAP was up 2.07% while BSESMALLCAP was up 1.18%. Very clearly the momentum in small cap and midcap has come back after taking a brief hiatus. It would be interesting to note that the outperformance of the midcap and Smallcap is by miles and this has made the retail investor indeed very happy. More details of the same are given in the article below. 

The Indian Rupee lost 31 paisa or 0.38% to close at Rs 82.25 to the US Dollar. Dow Jones gained on four of the five trading sessions and lost on one. It was up 231.60 points or 0.66% to close at 35,459.29 points. The US FED has raised interest rates yet again by 25 basis points to a band of 5.25%-5.50% on expected lines. This makes the present rates the highest since 2001. The commentary, post the meeting leaves room for yet another hike before the calendar year is over. The differential between the rate in US and India is also the lowest and is a mere 1.00% to 1.25%. One is not sure how the carry trade would operate in these conditions. 

Coming to the market performance of the benchmark indices one finds very interesting data. BSESENSEX rose from its March 23 low of 57,500 points to a high of 67,600 points, a gain of 12,100 points or 21% over its March low. Similarly NIFTY gained 3,078 points or 18.19% from its low of 16,913 points to a high of 19,991 points. The real outperformers saw BSEMIDCAP gain 6,560 points or 27.79% from its low of 23,600 points to 30,160 points. Even higher was the performance of BSESMALLCAP which gained 8,428 points or 32.26% from its low of 26,120 points to 34,548 points. Clearly with the outperformance and small investors being beneficiaries, no one would complain. The danger however lies in the ‘pump and dump’ situation that one is witnessing in many stocks. The stock exchange guidelines have introduced surveillance measures which have become very strict on sharp price movements to protect investors. But currently the mood is optimistic and no one tends to look at the measures and what they imply. The SME exchanges whether it is BSE or NSE are in their own world and are seeing record subscriptions and huge listing gains. Many of the main board issuers of capital may be wondering whether coming to the main board is the right decision looking at the huge valuation difference which is existing. Hope someone from the exchanges and the regulator takes note to restore sanity. 

July futures saw selling on expiry day and there was weakness in the market. For the series however it did very well and bulls had a great time. The series gained 687.80 points or 3.60% to close at 19,659.90 points. 

In terms of primary markets news, we had one listing and one issue opening and closing for subscription. Shares of Netweb Technologies Limited which had tapped the markets with its fresh issue and offer for sale at Rs 500 listed on Thursday the 27th of July. The discovered price was Rs 942.50 on BSE and Rs 947 on NSE. The share closed day one at Rs 910.50, a gain of Rs 410.50 or 81.25%. On Friday it saw profit taking and closed at Rs 898.65, a gain of Rs 398.65 or 79.73%. 

Yatharth Hospital and Trauma Care Services Limited had tapped the capital markets with its fresh issue of Rs 490 crs and an offer for sale of 65.51 lac shares in a price band of Rs 285-300. The company runs three hospitals in Noida, Greater Noida and Noida Extension totalling 1,100 beds. It has in the previous year acquired a hospital in Orchha, Jhansi of 305 beds as well. The issue was oversubscribed 37.28 times overall with QIB portion subscribed 86.37 times, HNI portion subscribed 38.62 times and Retail portion subscribed 8.65 times. There were 12.30 lac applications.  
The August series has begun and it will have a couple of holidays in the series.  Expect markets to be volatile and sharp two-sided moves as the series progresses. Current levels of 66,100 on BSESENSEX and 19,600 on NIFTY would act as pivots with a movement in either direction happening. Strong support exists at levels of 19,200 and 65,000 respectively.  Previous highs on BSESENSEX of 67,600 and 19,991 on NIFTY would act as strong resistances and supply zones. Crossing Mount20K would be a challenge going forward in the immediate short term. 

Strategy for the week would be to book profits on any strong rallies and buy on sharp dips.  The midcap and Smallcap space would attract investors and this should be an area of concern. Be very selective to shop for shares here and refrain until and unless the fundamentals are very compelling. 

Trade cautiously.