Taking long positions in large-cap stocks holds value

In primary market news there was just one listing that happened during the period under review. Shares of Valiant Laboratories Limited, which had issued shares at Rs 140, listed on Friday. The share closed at the upper circuit

The effect of the Israel-Hamas war lasted for one day on the markets in India and across the world. We saw a substantial correction on Monday in the markets, but they more than regained their losses on Tuesday itself. At the end of the first two days of the week they were actually higher than what they were on Friday evening, indicating the underlying strength in the markets. The period October 5-11 under review saw markets gain on four of the five trading sessions and lose on just one session. At the end of the period, it appears that momentum is with the bulls and markets are set to cross key resistance of 19,800-19,850 on Nifty quite comfortably in the coming days. BSE Sensex gained 1,247.01 points or 1.91 per cent to close at 66,473.05 points, while Nifty gained 375.25 points or 1.93 per cent to close at 19,811.35 points.

Dow Jones also saw a week of recovery after hitting a low close to 32,850 points. There was a strong rebound and it gained on four of the five trading sessions during the period. Dow gained 736.82 points or 2.23 per cent to close at 33,739.3 points.

In primary market news there was just one listing that happened during the period under review. Shares of Valiant Laboratories Limited, which had issued shares at Rs 140, listed on Friday. The share closed at the upper circuit. The share closed at Rs 169.05, a gain of Rs 29.05 or 20.75 per cent. On Wednesday, the share closed in a similar range, at Rs 167.25, up Rs 27.25 or 19.46 per cent. RBI in its monetary policy review kept key lending rates unchanged on expected lines.

In global news, there was a sudden firing on the Israel-Palestine front, which had led to a declaration of war. One does not know what would be the developments of this war and how things would shape up. However, in the short term it’s one more uncertainty in global events. As far as markets are concerned, there was a down day on account of the war on Monday, and thereafter markets have rallied strongly, suggesting that we are insulated from what happens in West Asia. Further, after a long time one saw FPIS buying in the markets after having been net sellers for a long time.

The markets seem to be at crossroads and need to decide where they are headed. In the previous period under review, gone by, they broke crucial support of 19,600 on Nifty, made a low at 19,333 on Wednesday (October 4), and thereafter rebounded quite smartly. They made a high of 19,675 points on Friday and closed at 19,653 points. The area of 19,600 to 19,650 is an important zone and becomes critical for markets going forward. There are two distinct possibilities here. The first which indicates bearishness is that we fail to sustain these levels and after some upward movement break 19,600 levels decisively. Go below 19,200 levels and continue downwards.

The second scenario, which is bullish and yet to fully unfold though already begun, is that we build from these levels upwards. In the process the first hurdle upwards would be 19,825-19,850 and then 20,200 levels. What would happen ultimately, your guess is as good as mine currently. The immediate requirement is that we should cross and sustain 19,850 without breaking 19,600 levels. If this happens, the fact that FPIs are currently net sellers for quite some time, may be forced to become buyers and cover shorts.

The markets have ended Wednesday at levels of 19,811.35 points, which gives a lot of comfort. If these levels hold for the next couple of days, we are likely to see a scramble towards 20,000 level and then towards 20,200points. All-in double-quick time. The trading strategy would be to take some long positions in the market in the large-cap stocks and allow the positions to ride. Markets are strongly poised and look headed to new highs sooner than later.

Trade cautiously.

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