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Trade cautiously without getting carried away (Column: Market Watch)

The week gone by began with a trading holiday because the fourth phase of polling took place on Monday (April 29) in Mumbai amongst other places, and both the stock exchanges are located there. Markets were volatile on Tuesday and closed with small losses. Wednesday was another holiday. Markets lost on the remaining two days as well. BSESENSEX ended the week with a loss of 104.07 points or 0.27 per cent to close at 38,963.26 points. NIFTY lost 42.40 points or 0.36 per cent to close at 11,712.25 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.55 per cent, 0.61 per cent and 0.70 per cent respectively. BSEMIDCAP lost 1.86 per cent and BSESMALLCAP lost 1.79 per cent.

Dow Jones traded on all five days and was virtually flat for the week losing 38.38 points or 0.14 per cent to close at 26,504.95 points. The Indian Rupee gained 79 paisa or 1.13 per cent to close at Rs 69.22.

A week is a long time and a lot happened this week. It all began with the UN Security Council declaring JeM chief Masood Azhar a global terrorist after China finally lifted the technical hold. This could be termed as a big political gain for India. This was followed by the US Fed meeting which decided to keep interest rates unchanged. The week ended with severe cyclonic storm ‘Fani’ making landfall near Puri, Orissa, on Friday with winds of over 120 miles per hour. The state government had evacuated over a million people and minimized loss of human life to just a few people. Damage to buildings, fields and standing crop is yet to be assessed but this was by far India’s best preparedness for a natural disaster of this magnitude.

The week ahead begins with the fifth phase of polling on Monday (May 6) for 50 Lok Sabha seats. The week would end with the sixth phase of polling on May 12 for 59 seats.

Markets would trade for the full five days and are likely to see momentum coming back with continuity of trading being there. The key driver for the markets is result season from corporate India where one is seeing some companies doing well and some faring badly. Last week for example Yes Bank reported their first set of results after the new CEO took over from Rana Kapoor and the bank saw huge losses being made on account of provisions. The share price lost Rs 61.80 or 26.03 per cent to close at Rs 175.60. On the other hand, one saw Bandhan Bank reporting a good set of numbers.

Markets have become volatile intra-day but on a weekly basis seem fairly range-bound in a broad 2 per cent range from the highs made in September 2018. Of course, these highs were breached in April 2019, but market is taking the previous highs as an area of support. With exit poll for election results due in two weeks from now, expect markets to take some decision on trend in the coming five to seven trading days. With expiry for May series to happen a week after results are declared for Lok Sabha, the series would be volatile and premiums for call and puts are very expensive. One cannot take a call based on either the premiums or the open interest as the same are evenly matched. If at all, the ruling party has an edge currently.

The strategy for the week ahead would be to play into the volatility and take advantage of the same. Markets would move in both directions and give opportunities for trades in either direction. Use sharp rallies to sell and dips to buy as prices tend to come back to original levels. Sector rotation is the order of the day and what was up one week is down the next.

Trade cautiously without getting carried away either direction.

(Arun Kejriwal is founder of Kejriwal Research and Investment Services)



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