Momentum thrust needed to take markets higher

The week gone by began with a bang with the best gains of the week being registered on Monday. It gained more than what the markets had lost on the previous Friday when the HDFC twins took a beating on the MSCI weightage issue.

BSESENSEX gained 973.61 points or 1.59 per cent to close at 62,027.90 points. NIFTY gained 245.80 points or 1.36 per cent to close at 18,314.80 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.52 per cent, 1.36 per cent and 1.30 per cent respectively. BSEMIDCAP gained 1.35 per cent while BSESMALLCAP was up 1.14 per cent.

The Indian Rupee lost 36 paisa or 0.44 per cent to close at Rs 82.16 to the US Dollar. Dow Jones lost on all five trading sessions and was down 373.76 points or 1.11 per cent at 33,300.62 points. What is worth noting is the fact that four of the five sessions saw losses of low double digits. With Friday seeing single digit losses, it could be presumed that we see Dow moving up in the coming week.

Karnataka state results saw the ruling BJP lose to the Congress, who won a simple majority on their own. There could be a knee jerk reaction on Monday as markets react to the result. The manifesto of the winning party saw them announce a number of freebies which are not liked by the market. There could also be a slowdown to the industrialisation that was being witnessed in the state. One could expect that some of the large MNC players looking to manufacture in India, look at other states.

Shares of Mankind Parma which was entirely an offer for sale of just about 4 crore shares at Rs 1,080, listed on Tuesday (May 9). The discovered price was Rs 1,300 and the share closed at Rs 1,424.05, a gain of Rs 344.05 or 31.85 per cent. By the end of the week the share closed marginally lower at Rs 1,395.70, still gaining Rs 315.70 or 29.23 per cent.

The issue of units from Nexus Select REIT was oversubscribed 5.73 times overall. The institutional portion was subscribed 5.04 times and the non-institutional portion subscribed 6.55 times. The company would be listed probably on Friday (May 19).

The complex deal between ABRFL and TCNS Clothing was not favoured by the street and shares of both companies lost ground with TCNS being the bigger loser. Shares of TCNS closed at Rs 400.45, a weekly loss of Rs 120.35 or 23.10 per cent. Shares of the acquirer ABRFL lost Rs 15.35 or 7.16 per cent to close at Rs 198.85. The deal implies the acquirer making an open offer to acquire shares of TCNS and then the remaining shares being swapped into ABFRL to complete the merger. Ultimately the shares of TCNS would stop trading.

While there are a couple of issues looking to tap the markets, valuations seem to be the key and the stumbling block in their going public. It would be interesting to see how many issues do come in the second fortnight of May.

Results from the heavyweight companies are out and now just the midcap and Smallcap stocks remain. While individually these stocks could move upward or downward post their results, concern about the benchmark stocks would remain. They have declared their results.

Market momentum seems to be missing and that explains why even though markets move up they seem to be held back at crucial resistances. With a lack of momentum, we could see yet another week where markets, after moving down at the beginning, make yet another move to break out of key resistances, only to falter at the end.

The market would find support at levels of 18,050-18,100 on NIFTY and at 61,050-61,200 on BSESENSEX. This looks as it would hold. However, the next level of support would be 17,800-17,850 and 60,450-60,600. On key resistances, the current level of 18,350-18,400 and 62,100-62,250 would act as strong resistances. It may also be taken as a pivot for the market. If these levels are breached and sustained, then the next levels would be 18,550-18,600 and 62,700-62,850.

Currently, the second levels look quite difficult to be achieved in the week ahead. We need news flow and a forceful momentum to take us up. There is a positive for bulls in the fact that over the last couple of weeks, FPIs have turned buyers. To add fuel to the bulls, inflation has come down and there may be a pause in interest rate hikes from RBI going forward.

The strategy would be to sell into strong rallies and buy on sharp dips. The focus would continue to remain in the midcap and small cap space.

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