Markets had a dream run last week and gained on all five trading sessions. The ensuing rally cumulatively has been the best one has seen in a week in about five years. Further this kind of rally in the last month of the financial year has come after about two decades. The question on one’s mind now is it it sustainable. How much juice is still left and what happens in April.
BSESENSEX gained 3,076.60 points or 4.17% to close at 76,905.51 points while NIFTY gained 953.20 points or 4.26% to close at 23,397.20 points. The broader markets saw BSE100, BSE200 and BSE500 gain 4.77%, 5.04% and 5.35% respectively. BSEMIDCAP was up 7.09% while BSESMALLCAP was up 7.87%. It was a roaring comeback by the bulls and they have mauled the bears undoubtedly.
The Indian Rupee had a spectacular recovery as well gaining Rs 1.02 or 1.17% to close at Rs 85.98 to the US Dollar. Dow Jones continued its volatile movement and gained 497.16 points or 1.20% to close at 41,985.35 points.
The week ahead sees March futures expire on Thursday the 27th of March. The current value of NIFTY at 23,397.20 points is a good 3.57% higher for the series. With the entire gains coming in this week and also recovering some of the losses that the NIFTY has suffered, will the bears pull back from here, it certainly appears so. The March rally has been spectacular and raises questions on its continuing further. Not much has changed except the technical of the markets. It probably seems done for the moment and needs to consolidate over the remaining five trading sessions of the month remaining.
The week saw a rally across the board and even the under pressure IT chipped in with small gains. The top performers were the capital goods, healthcare, realty and even the PSU sectors. The evergreen Banking sector chipped in with above average gains.
The week ahead would have an extended weekend as the following Monday would be a trading holiday. This would put pressure on the markets on Friday as there would be a three day holiday while global markets would trade on Monday. The good part however would be that the new April series would have begun and being the first day, not heavily traded. With the sharp rally over the last week, and particularly over the last two days, bears and FPIs have been squeezed quite hard. This also led to FPIs buying quite aggressively, something not witnessed over the last many months.
The next important event to look at would be announcements made on tariffs by Donald Trump on the 2nd of April. The impact of these announcements would be felt by us when trading resumes on the 3rd of April in Indian markets. It would make sense to study the implications before taking a meaningful exposure to markets.
The strategy in expiry week would be to take profits if not totally, at least the majority of them off the table. The rally in midcap and Smallcap which have rallied later has been more than the large caps which is a worrisome factor. Anyway, markets correct short term anomalies faster than one can imagine. Trade in large cap and a select group of small and midcap which is identified by you and one has the comfort with valuations. January to March quarter results and annual results are a mere three weeks away and will throw light on the expected improvement in them. As mentioned in earlier articles, the markets need to build a base from which they can begin yet another rally over time.
In terms of support and resistances, strong support exists at levels of 22,850-22,900 on NIFTY and at 75,550-75,700 on BSESENSEX. On the resistance side we have very strong resistance from the previous high at levels of 23,750-23,800 points on NIFTY and at 78,650-78,800 on BSESENSEX. With such a strong rally over the last five sessions and over two weeks overall where we have risen 4,300 points on BSESENSEX and 1,450 points on NIFTY, the need of the hour is consolidation.
Trade cautiously.