Another up move a test for recovery

The current value of Nifty indicates that the July series is down by 81.05 points or 0.51%

It was an extremely choppy and volatile period that markets witnessed during July 22-28. In this period markets gained on two of the five sessions and lost on three of them. They managed to gain because of the very strong session on the first day which was July 22. BSE Sensex gained 245.20 points or 0.47 per cent for the period, to close at 52,443.71 points, while Nifty gained 77.30 points or 0.49 per cent to close at 15,709.40 points. The lows made today were at 51,802.73 on BSE Sensex and 15,513.45 which were significant intraday losses before markets turned. It's becoming increasingly clear that markets are finding the going tough and making of new highs is not easy.

The present fall is even after a strong showing by Dow Jones which has gained 1.58 per cent in the last five trading sessions and hit a new lifetime high of 35,150 points and a closing level of 35,144.31 points.

Primary market euphoria seems to continue to gain ground. Shares of Zomato Limited which were issued at Rs76 listed last Friday and closed at Rs125.85, a gain of Rs 49.85 or 65.59 per cent. They gained further in the next three days and hit a high of Rs 147.80, before closing at Rs131.60 today. They made a low of Rs123.60 today which was lower than the close of Friday. Very clearly the business of Zomato does not support the price and certainly not what the street could be expecting from the company with these valuations.

Glenmark Life Sciences Limited is tapping the capital markets with its fresh issue of Rs 1,060 cr and an offer for sale of 63 lakh shares in a price band of Rs 695-720. At the end of the 2nd day of the issue, it was oversubscribed 5.9 times and there were 24.42 lakh applications from retail investors.

Rolex Rings taps the market with its fresh issue for Rs 56 cr and an offer for sale of 75 lakh shares in a price band of Rs 880-900. The issue opened on Wednesday (July 28) and closes on Friday (July 30).

There are issues galore coming to the markets and in the coming period of July 29 to August 4, there are two more issues lined up at the bare minimum. They are from QSR (quick service restaurant) chain, Devyani International Limited and ceramic tiles manufacturer, Exxaro Tiles Limited. More on them once they have their roadshows.

Shares of Tatva Chintan Pharm Chem would be listed on Thursday (July 29). The company had received overwhelming response to its IPO and was subscribed 182 times. Against an issue price of Rs 1,083, the grey market is quoting at a price which is roughly 110 per cent of the issue price.

July Nifty futures which were for a five-week period would expire on Thursday. The current value of Nifty indicates that the series is down by 81.05 points or 0.51 per cent. While the series had not done much, it has been volatile with a range of 15,962 points on the higher side and 15,513.45 points on the lower side which was made today only. While the bears have an upper hand and bulls would be under pressure, the turnaround and recovery witnessed in the second half would want me to favour the bulls and give them the advantage in tomorrows trading.

Multiple attempts have been made to breakout of key resistance zones where a series of tops have been made. Historically markets have never peaked without a flurry and euphoria at the top. The only concerning fact is the number of times we get close to it and then just fizzle away. We could be getting into another up move which should make markets recover and test the 53k mark on BSE Sensex and 16k mark on Nifty in the next period under review.

The strategy should be to buy into sharp dips and sell on rallies and continue to upgrade the quality of stocks held in the portfolio.