Sunday, May 26, 2024

New highs wait seems getting longer

Markets in the week gone by made a valiant attempt to make new lifetime highs but failed. The top five-six heavyweight stocks in the benchmark indices need to fire on all cylinders at the same time for something like that to happen. That is the missing piece. However, the midcap and Smallcap indices are firing away and continue to make new highs.

Markets saw the benchmark indices rise on two of the five trading sessions. They lost on two, and the fifth was a flattish day. At the end of it, BSESENSEX inched up 78.52 points or 0.13 per cent to close at 62,625.63 points while NIFTY gained 29.30 points or 0.16 per cent to close at 18,563.40 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.17 per cent, 0.29 per cent and 0.40 per cent respectively. BSEMIDCAP gained 0.82 per cent while BSESMALLCAP was up 1.64 per cent.

The Indian Rupee lost 16 paisa or 0.19 per cent to close at Rs 82.46 to the US Dollar. The US FED meets between June 13 and 14 for its policy review meeting where there could be a small interest rate hike before a pause begins. This would be because the last job data showed that unemployment rose in the country. How the Dow reacts to the FED statement would influence world markets. Dow Jones gained on the last four sessions continuously and lost on one session. Dow Jones gained 114.02 points or 0.34 per cent to close at 33,876.78 points.

RBI in its bimonthly policy meet kept interest rates unchanged. Repo rate remains at 6.5 per cent. RBI has conveyed its intention to tackle inflation and make best efforts to bring the same down. The differential between the Repo rate in India and the US Fed rate would probably be the lowest ever in over 25-35 years that I have understood such interest rates and what they mean. The rupee needs to show strength and start appreciating slowly so that the forward cover comes down as we go forward. This would be a big help.

The IPO from Ikio Lighting which was open between Tuesday (June 6) and Thursday (June 8) fared very well and beat all expectations. The issue which comprised a fresh issue of Rs 350 crore and an offer for sale of 90 lakh shares was oversubscribed 67.75 times overall. The QIB portion was subscribed 163.06 times, HNI portion was subscribed 65.38 times and Retail portion was subscribed 14.30 times. There were 16.33 lakh applications received. The price band was Rs 270-285.

The benchmark indices had made their lifetime highs on December 1, 2022 and we are trying to make new highs once again but failed to do so. At the same time action which is concentrated in the midcap and Smallcap space has moved these indices to new levels altogether. BSEMIDCAP on December 1 made a high of 26,146 points and then saw a high of 26,440 points on December 15. It hit a low of 23,356 points on March 28 and since then has been moving in an uptrend virtually non-stop. The high made last week was 27847 points. The difference between December 1, 2022 and today is 1,700 points or 6.5 per cent.

BSESMALLCAP has had a similar movement as well with the December 1 level being 29,816 points, and then saw a high of 30,092 points on December 15. The 28th March low was 26,120 and the high during the week was 31,391 points. The difference being 1,576 points or 5.28 per cent. This is a segment where FPIs are active in a handful of stocks only and even domestic mutual funds are selective. Public participation is large and markets are doing well.

Coming to the markets in the week ahead, the outcome of the FED meeting would play an important role. There is expectation of a rate hike this time around. Markets would continue to strive to make new highs and as mentioned earlier the attempt can only be successful if the heavyweights fire. Two of them are getting ready. The first being Reliance with the impending corporate announcement of the demerger of the financial services record date. The second would be the timeline of the HDFC Twins merger record date. Both these companies have the potential to provide the boost that the markets are looking for.

The strategy for the week would be to look for action in the midcap and Smallcap space. Sharp movement looks unlikely and besides the FED meeting, corporate announcement as mentioned above, the only trigger could be the break of monsoon in large parts of the country. Trade cautiously.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)

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