Avoid Large Positions Amid Uncertainty

It was a super volatile week at the markets during the May 8-14 period. We saw India launching Operation ‘Sindoor’ on the terror camps across the border in POK and deep in Pakistan territory simultaneously at 9 locations. These were precision strikes and something which was unparalleled till date in any attack globally. Pakistan retaliated with drones and missiles and we had three-four days of tension in India and globally.

On Saturday, a ceasefire was agreed upon with terms to befinalized on Monday the May 12. While India has made things very clear that there is only oneagenda which is about terror and terrorism, Pakistan wants to talk about Indus water, POK and soon. The fragile ceasefire is currently delicately poised, with no discussions. What is disturbing but unconfirmed as yet, is the fact that we have reached the bunkers where Pakistan has its nukes and there is some leak there. This is also linked with the earthquakes that are being witnessed regularly.

Coming to the markets, we saw a sharp 3,000 points rally on BSE Sensex on Monday (May 12) followed by a 1,300 points correction on Tuesday. Wednesday opened strong, but the rally saw gains being given up and after briefly trading in the negative ending positive. BSE Sensex gained 583.78 points or 0.72 per cent to close at 81,330.56 points, while Nifty gained 252.50 points or 1.03 per cent to close at 24,666.90 points. Markets gained on two of the five sessions and lost on three. Dow Jones had a great period with a single day gain of 1,150 points on Monday.

Incidentally this was the day when Indian markets went ballistic. The event in US was some trade agreement between China and US where they reduced the reciprocal tariffs on each other. Dow gained on three of thefive sessions and lost on two. Dow gained 1,311.43 points or 3.21 per cent to close at 42,140.43 points.

Results season continues and the tempo and quantum of results being declared is significantly on the up. The number of results which could be termed as good to outstanding is significantly lower than those which could be termed as flat to negative. The majority are in line and could be termedas unexciting. Hence, we do not see any significant upside on account of results. FPIs action in the market place has been a mixed lot. In the first half of May so far, their net purchases have been at Rs8,627 crore. During the last three days, they have been net sellers on two days. Against this, Domestic institutions have been net buyers to the extent of Rs19,463 crores. FPIs have been buyers in largely the large cap stocks and they (large-cap) have been out-performing the markets in the current move.

Key levels of 24,500 and then 24,800-850 were taken out during the rally which took place on Monday. While markets corrected on Tuesday and they retraced to below 24,800, levels of 24,500 continue to hold. As long as this level holds, markets would be in a positive frame of mind. However, if they were to fall below 24,000 points and going further down to 23,800-850 it would because for worry. Could this happen? Why not? Pakistan cannot be trusted and the commentary that one heard over television and statements from the top leadership of Pakistan, does make oneworried. One surprising fact is their statement that they have won the war.

Going forward in the May 15-21 period ahead, expect markets to be volatile and looking for news. The India US trade talks are expected to happen in the coming week and hopefully we should have adeal sooner than later. For surety’s sake, India has filed in WTO a counter vailing duty on US. While China and USA have scaled down the retaliatory tariffs on each other, the final structure is yet to bedecided.

Markets would be volatile and await tariff negotiations scheduled for the week ahead between India

and USA. Tough times for the markets as one event, the confrontation between India and Pakistan is

temporarily over, but the lingering doubt persists. Avoid large positions on weekend as nasty events

have a tendency to happen on weekends. Trade cautiously.

(The author is the founder of Kejriwal Research and Investment Services,

an advisory firm)