The week gone by had four trading sessions but they were as volatile as ever. The week began well and when we returned on Friday after the Thursday holiday, it appeared that the week would end positively. Alas! Nothing of that sort happened and we saw markets melt between 3pm and 3.30pm on Friday, on account of MSCI index rebalancing. FPI’s sold Rs 1,10,839 crores and bought Rs 89,733 crores on Friday. The net sales were Rs 21,105 crores which is a huge number. Domestic institutions were net buyers of Rs 16,764 crores. This floating stock will take some time to be absorbed.

In a week where we saw markets gain on one of the four trading sessions, BSESENSEX lost 639.61 points or 0.85% to close at 74,775.74 points while NIFTY lost 171.55 points or 0.72% to close at 23,547.75 points. BANKNIFTY gained 183.85 points or 0.34% to close at 54,239.20 points. The broader markets saw BSE100, BSE200 lose 0.39% and 0.11% while BSE500 gained 0.01%. BSEMIDCAP was up 1.71% while BSESMALLCAP gained 1.85%. The top sectorial gainer was BSEPOWER up 3.73% while the top loser was BSEFMCG down 1.59%.

The Indian Rupee gained 56 paisa or 0.59% to close at Rs 95.14 to the US Dollar. Dow Jones gained on three of the four trading sessions and lost on one. It gained 452.76 points or 0.90% to close at 51,032.46 points.

NIFTY futures for May expired on Tuesday the 26th of May. The series had begun at a level of 23,995.70 points. It closed with a minor loss of 82 points or 0.34% to close at 23, 913.70 points.

The intraweek highs were made on Tuesday at levels of 76,627 points on BSESENSEX and at 24,089 points on NIFTY. The lows which were made on Friday were at 74,589 points and 23,484 points respectively.

We have one main board IPO which is opening on Wednesday the 3rd of June and closing on Friday the 5th of June respectively. The issue which is entirely an offer for sale of 3,28,58,323 equity shares in a price band of Rs 182-192 is from CMR Green Technologies Limited. The company is India’s largest metal recycler in the domestic aluminum recycling industry. The clientele includes top OEM’s in the two wheeler and four wheeler manufacturers and also auto component manufacturers. CMR Green has 13 strategically located plants across the country concentrated near its customers which helps it in also supplying liquid metal to them.

The company in the last 16 years since inception grew at a CAGR of 23%. The company reported revenues of Rs 6,666 crores for the year ended March 25 with EBITDA of Rs 303.71 crores and a PAT of Rs 155 crores. The company looks interesting simply because of the fact that aluminum is 100% recyclable and its uses are increasing rapidly. Secondly the strong client and customer base ensure that the company has an automatic growth charted out to existing customers and new customers as well. The average capacity utilization is around 70% which helps the company take care of peak demands and also plan regular maintenance as well. The PE multiple of the issue based on FY 25 number is at 28-29.54 times which is very competitive as compared to the peer set. Investments are warranted for the medium term looking at the demand and opportunity in the sector.

The week ahead sees RBI meet for its policy review meeting between the 3rd and 5th of June. It is widely believed that even though inflation is rising in India, it is still within the band set by RBI and therefore rates would be kept steady and unchanged. Could RBI make a mild change in its stance for growth considering oil prices, not sure?

Coming to the Iran-USA stand-off, things seem headed in a completely new direction. Earlier it was all about enriched uranium and Hormuz Strait. Now there is a new twist where the Arab nations are to come to terms with the USA on the Abraham accord which basically grants legitimacy and acceptance of Israel without similar rights to Palestine. This could be a very contentious issue and cause lot of heartburn to the Gulf nations including Pakistan. Will there be a peace accord or things continue to linger? Only time will tell. The world will continue to be in a state of flux till resolution happens. This effectively means markets will be volatile and choppy and oil hot as hot can be.

Coming to markets, immediate resistance would now be around 23,850-23,900 levels on NIFTY and then at 24,400 points or around. On the downside, support would be around 23,300 points and lower down at 22,800 points. Dangerous warning signals globally from rising 10 year yield in US and inflation which is raising its ugly head all over again.

The strategy would be to refrain from overnight positions and restrict to intraday trades only. Markets need clarity as we are still at cross roads and there is utter confusion on the geo-political front. Russia seems to be likely to gain the upper hand in the Russia Ukraine conflict and we could see a closure there sooner than later. The simple message trade cautiously.

On a separate note, we have begun a new initiative called PSI Capital, where we explore how geopolitics, macro and commodities come together to shape markets. 

Our most recent piece looks at how, if oil has made the first move, the next move is likely on rates — you can read it here: https://psicapital.substack.com/p/second-wave-different-barrel. 

If you enjoy this kind of analysis, do follow PSI Capital on X at @psi_cap.

Arun Kejriwal (Market Veteran Investor & Opinion Maker)