Market to remain volatile, choppy amid inflation combat measures

Markets were fairly balanced when trading began on Wednesday morning. The announcement that RBI governor Shaktikanta Das would address a press conference at 2pm rattled the markets. The period under review April 28th -May 4th saw markets tank about 1,300 points on BSE Sensex on Wednesday and almost 400 points on Nifty. The period saw BSE Sensex lose 1,150.36 points or 2.07 per cent to close at 55,669.60 points while Nifty lost 360.80 points or 2.16 per cent to close at 16,677.60 points. Markets gained on one of the four trading days and lost on three days.

RBI has increased Repo rates by 40 basis points to 4.40 per cent from the present 4 per cent. Similarly, they have hiked CRR from 4 per cent to 4.5 per cent. The idea of a sudden ad-hoc rise is omnipotent and hints that there could be a big hike when US Fed completes its two-day meet later today.

Dow Jones gained on four of the five trading days, but the loss on Friday of over 900 points saw Dow ending the period under review with losses of 112 points or 0.33 per cent. US Fed has made small gains in the current week on Monday and Tuesday of 84 and 67 points after a 939-point loss on Friday. With the FED expected to announce a minimum rate hike of 50 basis points or more, things would be interesting in markets globally. If the hike is greater than the 50 points expected, markets could take another beating. If it is expected 50 points or lower, there could be recovery. The possibility of a bigger raise than 50 basis points looks most likely and hence markets are week today in Asia and Europe.

In market news, Adani Wilmar announced the acquisition of the rice and ready to cook brand 'Kohinoor' from the Swiss company. The share lost 5 per cent to close at Rs 716. The share has been falling after it made a 52-week high of Rs 878.35.

The mega IPO from LIC of India Limited to raise roughly Rs 21,000 crores has opened from Wednesday the 4th of May. The issue would close for subscription on Monday the 9th of May and bidding would be permitted on Saturday the 7th May, which is the first of its kind. The issue which consists of an offer for sale of 3.5 per cent of the company's equity is valued at 1.1 times its EV of Rs 5.39 lakh crores. Bidding for the issue will continue till 7pm everyday against the normal 5 pm. At the time of writing the article, the issue has received over 23.20 lakh applications and the issue is subscribed 65 per cent overall. An excellent response considering there are four days and an extra Saturday for bidding. The issue is a must subscribed for investors and offers appreciation for investors on listing and in the medium term.

Coming to the period May 5th-11th, markets will be volatile and choppy. The sudden and unexpected announcement by RBI is a wakeup call on inflation. Expect the worst from the US FED. The strategy going forward should be to sell on rallies. The sentiment and technical charts would offer relief only once the levels of 57,100 on BSE Sensex and 17,100 are crossed and held. They need to then breakout of the cluster zone of 58,100-58,300 and 17,400-17,500 respectively. Till the above happens, keep selling on every rally and look to buy on sharp dips.

(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)