Barring budget day surprises expect markets to trade with a negative bias

New Delhi: Markets last week had a truncated trading week with just three trading sessions. The opening day and closing days of the week were trading holidays with the first being a holiday on account of the Ayodhya temple Pran Pratishtha and Friday on account of India's Republic Day.

Markets were volatile in the three sessions and they lost on two sessions and managed to gain on one session. What is more important is the fact that the midcap and Smallcap space which have been the outperformers in 2023 are now in the firing line.

In the last week, on all three sessions the midcap space saw a movement of about 3 per cent on an intraday basis while Smallcap saw the same on two of the three sessions.

This extreme volatility will make small investors who hold these shares quite worried and catch them on the wrong foot. While markets seem to be in some sort of a corrective mood, the street believes in a feeling of every dip as a buying opportunity.

BSE Sensex lost 722.98 points or 1.01 per cent to close at 70,700.67 points while Nifty lost 219.20 points or 1.02 per cent to close at 71,352.60 points. The broader indices saw BSE 100, BSE 200 and BSE 500 lose 1.02 per cent, 1.02 per cent and 1.04 per cent respectively. BSE Midcap lost 1.65 per cent while BSE Smallcap lost 0.58 per cent.

The Indian Rupee lost 6 paisa or 0.07 per cent to close at Rs 83.12 to the US Dollar. Dow Jones gained on three of the five sessions and lost on two. It was up 245.63 points or 0.65 per cent to close at 38,109.43 points.

In primary market news, the issue from Medi Assist Healthcare Services listed on Tuesday (January 23). The company had issued shares at Rs 418 and shares closed on day one at Rs 464.25, a gain of Rs 46.25 or 11.06 per cent. By Thursday, the share gained marginally and closed at Rs 464.80, a gain of Rs 46.80 or 11.20 per cent.

The issue from Epack Durable Limited closed for subscription on Wednesday (January 24). The issue was in a price band of Rs 218-230. The issue which consisted of a fresh issue of Rs 400 crore and an offer for sale of 1.04 crore shares was subscribed 16.79 times overall with QIB portion subscribed 25.59 times, HNI portion subscribed 29.06 times and Retail portion subscribed 6.50 times. There were 8.58 lakh applications.

The issue from Nova Agritech Limited for a fresh issue of Rs 112 crore and an offer for sale of Rs 31.81 crore in a price band of Rs 39-41 received overwhelming support and was oversubscribed 113.20 times. The QIB portion was subscribed 81.13 times, HNI portion was subscribed 233.01 times and Retail portion was subscribed 80.19 times. There were 25.42 lakh forms.

January futures expired with bears dominating the series after a flurry of activity and bulls calling the shots in the first fortnight of January. Thereafter bears had things their way and they pulled the series back and saw it end with losses. January futures ended with losses of 426.10 points or 1.96 per cent to close at 21,352.60 points.

The Union Budget would be presented on Thursday (February 1, 2024). While this is an election year and the budget would be by and large a vote on account, there could always be some announcements which are directed towards the common man and the middle-class masses so as to make their life a little easier. While expectations normally run high, I believe the endeavour would be to ensure that there is a gain in disposable income of about Rs 50,000 in the hands of this category. This could be by way of standard deduction or even tinkering with the new and old tax regime which was done last year.

The week would see a number of companies announce their roadshows and primary issue opening program on Friday and in the following week. The sort of lull witnessed in main board IPOs should again see the pace picking up from February 2. In January we saw just two issues listed so far and another two that would list in the following week.

Markets have become choppy and volatile. The movement is large and moves from positive to negative and vice versa on virtually every single day. It makes money making that much more difficult. Many large cap companies have declared results and they are a mixed bag. Going forward we would see the focus shift to results from midcap and Smallcap space. Herein lies the danger as with the sharp runup over the last quarter in particular, valuations have become a concern. If this space does not declare decent and excellent results with substantial growth in topline and bottom line, many of these companies would become expensive. Herein lies the danger and these results would come in the first fortnight of February bunched towards the middle of the period.

The strategy for the week ahead would be to sell on rallies and allow the markets to correct themselves. Be choosy in buying. Expect sharp two-sided moves in the coming week with a downward bias. Thursday on account of budget could be a super volatile day.

Trade cautiously.