Be ready for another week of volatility, choppy markets

By Arun Kejriwal:

Markets were under pressure last week and lost on every single trading day. Considering that there were losses for five days, the cumulative amount was not that very large. BSE SENSEX lost 737.53 points or 2.02 per cent to close at 35,808.95 points. NIFTY was down 219.20 points or 2.00 per cent at 10,724.40 points. The broader market lost a little more with BSE100, BSE200 and BSE500 down 2.33 per cent, 2.26 per cent and 2.30 per cent down. The bigger pain continues to be in the mid and small cap which were down 2.71 per cent and 2.96 per cent respectively.

BSEMIDCAP is less than 3 per cent away from making a new 52-week low while BSESMALLCAP is at a 52-week low. The problem with these small shares is that there seems to be no level at which they would stop. They seem to be just falling non-stop and there are no levels for support for these stocks.

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Dow Jones had a positive week and gained 776.92 points or 3.09 per cent to close at 25,883.25 points. The Indian rupee gained 8 paisa or 0.11 per cent to close at Rs 71.22.

Results season is over and there have been some positive takeaways from them. Clearly, the auto sector and the ancillary makers have been under pressure with the largest auto maker Maruti seeing a slowdown. The impact of this is likely to remain for a couple of quarters.

The terror attack on the CRPF by a suicide bomber in Jammu and Kashmir — the world has unitedly condemned the attack and asked Pakistan to take immediate action — has added to the political tension, with elections due in about two months.

The window of new announcements and projects to be launched in the run-up to the election being notified is about three weeks away. Expect a slew of them as we get ready for the mother of all election which will be a watershed one. Many parties would be fighting this election for their survival and a poor showing this time around could be disastrous for their future.

The knack with which market finds its weekly bogey stocks simply continues. This week it was the turn of Apollo Hospital and Emami which has a large portion of promoter shares being pledged. Emami lost Rs 24.90 during the week or 6.90 per cent after losing Rs 27.25 in the previous week to close at Rs 360.85. Apollo Hospital lost Rs 118 or 10.34 per cent to close at Rs 1,141. With promoter pledge becoming such a big concern, one is finding that shares seem to just tumble.

The broader issue is that a large portion of this financing has been done by mutual funds and some of it by NBCs. The golden run of mutual funds which saw huge inflows through SIP post demonetization seems to have run its course and come to a complete halt. Live SIP accounts have fallen to 1.87 lakh accounts in December 2018 from 4.81 lakh accounts in April 2018. With the current state of the market being what it is, this situation is likely to worsen as returns are negative from the stock market.

The week ahead is likely to see the market under pressure and test key support levels. There are multiple supports and we have about three to four major levels of support in a span of 300-350 points on the NIFTY. If these levels hold, it would be a reason for the markets to rebound. In case they fail, there could be some panic before value buying comes in.

Brace yourself for yet another week of volatility and choppy markets.

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