Mkts full of pump, dump stock movements

MARKETS have been on a roll and on the very first day of the start of a new series of June futures, Nifty hit a life time high. BSE Sensex still has some distance to go and may happen sooner than later. For the period under review from 27th May to 2nd June, BSE Sensex gained 831.97 points or 1.60 per cent to close at 51,849.49 points. Nifty gained 294.75 points or 1.89 per cent to close at 15,596.20 points. During the period, markets gained on three days and were negative or flat on the remaining two days.

May Nifty futures expired on a positive note at 15,337.85 points, a gain of 442.95 points or 2.97 per cent. The series gained 162 points during the last four days of expiry. The new series began with a bang and saw Nifty make a lifetime high at 14,469.65 points, surpassing the 16th February high of 14,431.75 points. Incidentally Nifty closed higher than this level on a closing basis on Friday as well. BSE Sensex high made on the same date was 52,516.65 points and is currently a good 700 points away. Looking at the way markets move this can happen in one or two days. The market however is looking tired and the movement over the last two days particularly, shows the tiredness and fatigue factor that is crept in. This could delay the inevitable new high.

Shares of PNB Housing are rocking after the PE investor Carlyle decided to infuse further capital of Rs 4,000 crore into the company at a price of Rs 390 per share. The open offer to acquire shares from the public to the extent of 26 per cent of the equity is at Rs 403.22. This price is now well below the open market price as the share has gained sharply and closed at Rs 693.80, a gain of Rs 256.10 or 58.51 per cent. With marquee names and Aditya Puri, the erstwhile MD of HDFC Bank being an advisor to Carlyle, there is no way this share can fall from current levels or reach anywhere near the open offer price. For record purposes, the 52-week high and low of the share is Rs 693.20 and Rs 183.45. This capital infusion will bring about a renewed thrust in the affordable housing space as well.

Results continue to pour in and there seems to be comfort post they being announced. Corporate India has weathered the storm of Covid-19 and lockdown. While GST collections for May are expected to be lower by about 30 per cent from the high of 1.41 lakh crore, it would still be creditable considering the lockdown imposed in many States.

The week ahead sees RBI meet between the 2nd and 4th of June for its bi-monthly monetary policy meet. While there is consensus on rates remaining unchanged, the markets would like to read the commentary post the meeting. This is particularly important where RBI in its annual report for 2020-21 released during the earlier part of the week, mentioned that they are worried about the rise in stock market prices which have doubled and warns of a stock market bubble.

First it was the oxygen crisis being resolved with the government lifting the ban of use of liquid oxygen for industrial purposes. Next was the positive news on production of Covid-19 drug, remdesivir which has increased by over ten times per day from the 33k level to 350k level. The Central government has proposed an inventory of 50 lakhs as an emergency build-up. Serum institute would be producing 10 crore vaccines for India in June. With Bharat Bio, Sputnik and likely Pfizer vaccines also adding to the kitty, June could see about 13-15 crore vaccines available. With positivity rates dropping sharply, things are looking up on the Covid-19 front from an India perspective.

The strategy for the period should be to continue to trade the markets. It can never be one way and that there will be two sided moves. Highs in the market were made in mid-February and markets fell about 10 per cent from those levels to regain them in the next three and a half months. Effectively we were moving up and down for that period of time. Buy on dips and sell on sharp rallies. Watch the quality of stocks which you deal in and ensure that they are fundamentally solid companies. Markets are full of pump and dump stock movements.

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