Markets will remain choppy, volatile amid uncertainty
The key supports 52,600-52,700 and 15,700-15,750 of last week would act as the first hurdle and for markets to cross 15,850-15,900 and correspondingly 53,000-53,200 points would be a tough call, once this is crossed it may make some upward move; Markets likely to drift with a negative bias in near future
The June 16-22 period under review saw markets falling on the first two days, rising on the next two before again falling on the fifth day. At the end of the period, BSE Sensex was down 718.86 points or 1.39 per cent to close at 51,823.53 points while Nifty lost 278.85 points or 1.81 per cent to close at 15,413.30 points. This time the BSE mid-cap and small-cap stocks were under tremendous pressure and lost significantly higher than the broader markets.
The FED announced an interest rate hike of 75 basis points on expected lines after very high inflation numbers in the US which were declared on 10th of June. This steep rate hike, which was on the cards, equals the highest ever which was done in 1994. The new interest rate band is between 1.5 per cent-1.75 per cent and it is almost certain that there would be another 75-basis point hike in the next FED meeting slated for the last week of July 22. This would increase the cost of borrowing significantly in the US and hit home owners as well.
Dow Jones had a volatile week, but managed to gain 164.30 points or 0.54 per cent. It gained on two of the four trading sessions. It had made surprise gains on the day that FED raised interest rates and caught the short sellers by complete surprise. It also hit a new 52-week low on Friday of 29,695 points. At this level, Dow was down 18.09 per cent on a year-to-date basis. On similar lines, even our benchmark indices had also made new 52week lows on the BSE Sensex of 50,921.22 points and 15,183.40 points on Nifty. At these levels, BSE Sensex is down 11.83 per cent on a year-to-date basis while Nifty is down 11.87 per cent. This clearly shows that the Indian indices have done better than the Dow Jones.
Vedanta Industries issued a surprise advertisement in newspapers on Monday inviting EOI (expression of interest) for its closed copper smelter located in Tuticorin, Tamil Nadu. The plant has been shut for about four years now due to environmental reasons. There is no way the plant can generate interest when it is shut. The only purpose could be to attract attention to the fact that a key asset in the country is lying idle and bring some pressure on the state and the environment ministry.
The share lost Rs 33.40 on Monday when the advertisement appeared. During the period under review, the share has fallen from Rs 291.40 to Rs 222.20, a fall of Rs 69.20 or 23.74 per cent.
Markets in the fall during the course of the reporting period broke crucial supports at 52,600-52,700 and 15,700-15,750 decisively. These levels had acted as support on a number of occasions. The break saw markets make a new low just below 50,900 and 15,180-15,190 levels. While these levels have been tested just once they should provide support on a couple
of occasions before giving way to the onslaught.
FII or FPI continue to remain net sellers and have sold about Rs 2.7 lakh crores of equity in the just about six months of the current calendar year 2022.
Domestic institutions have tried to keep pace with the selling and have bought stock worth Rs 2.20 lakh crores. This is on the back of strong SIP inflows which are in the current financial year averaging Rs 12,000 crores per month against Rs 10,000 crores last year and Rs 8,000 crores in the previous year.
Coming to the week ahead in the period June 23rd to 29th, markets will remain choppy and volatile. We will have bouts of gains and losses and markets may actually drift with a negative bias.
The period would end with just one day for June futures to expire on 30th June which would be a volatile day. With markets having made new 52-week lows in the current period under review, they have become vulnerable and would trade with a negative sentiment and every rally should be used to sell.
Markets regaining ground would get tougher. The key supports which broke down last week would act as the first hurdle and for markets to cross 15,850-15,900 and correspondingly 53,000-53,200 points would be a tough call. Once this is crossed which could take some time or if the Russia-Ukraine war ends, markets would have some upward move.
Till something like this actually happens, use rallies to sell and avoid remaining significantly long or short at the end of day as markets would tend to open with up or down gaps every day.
(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)