Short is hot

Trade with caution in a truncated week

Short is hot

Trade with caution in a truncated week

India won the World Cup of cricket on Saturday, April 2 but the stock markets celebrated that victory the day after on Monday by gaining 281 points on the BSE SENSEX and 72 points on the NSE NIFTY. The Monday jump helped in ending last week on a positive note. Now though, the sentiment has turned negative and cautious.

The markets reacted on Monday after India's World Cup win last Saturday

Gains
For the record book, this is the third consecutive week of gains. The BSE SENSEX gained 31.06 points or 0.16 per cent to close at 19,451.45 points while the NSE NIFTY gained 15.95 points or 0.27 per cent to close at 5842 points. The intra week high of the SENSEX was 19,811 and the NIFTY was 5,944 signifying a fall from higher levels and virtually giving up of almost the entire gains. The broader market fared better with the BSE 500, BSE 200 and BSE 100 gaining 0.99 per cent, 0.74 per cent and 0.52 per cent respectively. The BSE MIDCAP gained strongly to finish 2.73 per cent higher, while the star of last week was the BSE SMALLCAP, which gained a staggering 4.96 per cent. Readers would recall that this is exactly what we were expecting.

Sustain
There was an IPO that listed called Shilpi Cable Technologies Limited and though the share listed well, it failed to sustain for even the first day. The share lost 30 per cent from its issue price and closed at Rs 47.60 against its issue price of Rs 69. A new dubious record has also been created where 95 per cent of the IPO size was delivered on day one.u00a0 It is quite surprising to find this new trend where promoters and merchant bankers do not even bother to have a road show to market their issues in the financial capital of the country. It clearly shows their intent and designs to fool gullible investors and I would urge investors to be very choosy before applying for new issues.

Fallen
A case has been filed against DB Realty group company Swan Telecom for FEMA violation of over Rs 3,600 crore. It may be mentioned here that the market capitalization of DB Realty as on April 8 is a mere 2,683 crore. The share closed at Rs 110.30 with a weekly loss of 6.2 per cent. This share has fallen from Rs 416.85 on the November 11 to the current price in a mere six months. The FEMA case was announced on Saturday and is likely to have a bearing on the stock price once the markets open.

Holidays
The week starting today, Monday, April 11, has two holidays on Tuesday and Thursday, which would break the trading momentum. Further, these are local holidays and global markets would be open at the same time. The week would see the reporting season for the March quarter and annual results kicking in. The rupee touched Rs 44 to the dollar, which would be a concern for exporters and also IT companies. Crude oil prices continue to rise and have touched new highs along with gold and silver. These are indications of increased uncertainty in global markets. The European Central Bank raised interest rates for the first time since the global economic crisis of 2008-2009 indicating future trends.

Downward
We are now likely to see some downward pressure in the markets. Margins are under pressure because of input cost increase, commodity price rise, interest rates going up and the fact that in a tighter environment, manufacturers lack pricing power. After a 2000-point rally on the BSE SENSEX consolidation would be the order of the day.u00a0

The BSE SENSEX has support at 19,327 points, then at 19,018 points, then at 18,866 points and finally at 18,785 points. It has resistance at 19,636 points, then at 19,712 points then at 19,811 points and finally at 19,945 points.u00a0

The NSE NIFTY has support at 5,810 points, then at 5,795 points, then at 5,753 points and finally at 5,695 points. It has resistance at 5,905 points, then at 5,944 points, then at 6,010 points and finally at 6,039 points.u00a0

The smart upward movement witnessed in the midcap and smallcap is likely to continue with sharp volatile movements in both directions. Investors should be cautious and trade with the market direction in a short, truncated week of a mere three trading days duration.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website https://ak57.in
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.
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All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

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