It is action caution

Be on your guard as global cues send mixed signals

Markets continued to gain and began trading on a strong note on Monday. Gains made on Monday saw markets end the week on a positive note with BSESENSEX up 393.27 points or 1.02 percent higher at 38,645.07 points. NIFTY gained 123.40 points or 1.06 percent to close at 11,680.50 points. The broader indices like the BSE100, BSE200 and BSE500 gained 1.22 percent, 1.31 percent and 1.37 percent respectively. BSEMIDCAP was up 1.95 percent while BSESMALLCAP was up 1.91 percent.

The top sectoral gainer was BSEPOWER up 4.63 percent followed by BSMETAL 4.46 percent, BSEIT 3.18 percent and BSEHEALTHCARE 2.91 percent. There were no sectoral losers; however the one to gain the least was BSECONDUR up 0.23 percent. In individual stocks the top gainer was Bosch up 14.48 percent followed by Tata Power 6.40 percent and Hindalco 6.32 percent. The top loser was Yes Bank down 9.10 percent, followed by Reliance Industries 2.98 percent and Eicher Motors 2.77 percent.

Under pressure
The Indian Rupee was under pressure and lost Rs 1.08 or 1.52 percent for the week to close at Rs 70.99. Dow Jones gained 174.47 points or 0.67 percent to close at 25,694.82 points.

August futures expired with significant gains of 509.50 points or 4.36 percent at 11,676.80 points. The bulls had an upper hand throughout the series and were never under any serious pressure from the bears. GDP for the first quarter of 2018-19 has clocked an impressive 8.2 percent and set off on a very promising note. It is encouraging and sets the tone for a GDP of 8 percent plus for the current year.

This month, we would see several primary issues tapping the capital markets, with the government bringing in a few issues as well. This would help in part achieving the divestment number set at the beginning of the year and make some headway in the ambitious target that is needed.

Euphoria must
Markets have been gaining over the past 10 weeks. It has been a slow and steady climb. Global conditions and valuations would not justify the current rally. With so much of disbelief all around, one does wonder how the rally continues. It is this very disbelief which has not allowed the momentum to set in, nor allowed any form of euphoria to build up. All of us are aware that rallies end in euphoria and that market bottoms are made in pessimism. With such an odd situation, it appears that the ongoing rally would have to get extended in terms of time, so that the expected and necessary euphoria sets in. This could take a couple of weeks to happen at best, and we could see another 500-700 points on the NIFTY. This does not mean that this is the target to be achieved but some indicative numbers only. However, the requirement of euphoria is a certain must and is important, without which the conditions would not be fulfilled.

Stay light
The coming week would be choppy and volatile with sharp intraday swings which would provide intraday players with trading opportunities. Such movement would also ensure higher volumes and therefore bigger or better participation. All this should hopefully culminate into euphoria. The strategy to be adopted continues to be that of being on the sidelines and using sharp rallied and dips to sell and buy respectively. Stay light and watch the market carefully.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd.
Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only.

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