Market Watch: After recovery, markets to consolidate this week

By Arun Kejriwal

The week gone by saw a sharp recovery in the markets coupled with fresh buying and some short covering as well. The fact that global markets were strong as well helped in the sentiment and strong recovery. Markets gained on the first four days of the week and there was profit taking on Friday. The usual week end profit taking phenomenon. The BSESENSEX gained 1.406.32 points or 3.54 per cent to close at 41,161.85 points while NIFTY gained 436.50 points or 3.74 per cent to close at 12,098.35 points. the broader markets saw BSE100, BSE200 and BSE500 gain 4.06 per cent, 4.014 per cent and 4.05 per cent respectively. BSEMIDCAP was up 519 per cent while BSESMALLCAP was up 3.46 per cent. With these gains, market has not only covered budget day losses but much more and recovered more than half of the previous weeks losses as well.

Dow Jones gained 846.48 points or 3 per cent to close at 29.102.51 points. The Indian Rupee lost 11 paisa or 0.15 per cent to close at Rs 71.45 to the dollar. Effect of the Coronavirus are still being assessed and it is widely believed that the number of people affected is far greater than the number in public domain. The good part about it is the fact that it seems far less deadly than the earlier SAARS and H1N1 virus.

RBI in its monetary policy review kept policy rates unchanged. It however introduced a new concept to infuse liquidity into the system through LTRO (Long term Repo Operations) which would be of 1- and 3-year duration and would be offered at repo rates. The amount planned to be made available is of the nature of 1 lac crs and would be beneficial to housing and developer loan and also auto sector.

Markets have had a good run and have got over the sharp correction of the previous week and also budget blues. Many of the fine print concerns have been addressed and resolved. This has helped in clearing the air about the budget.

After the correction, and then the equally smart recovery, markets are set to consolidate in the coming week. This consolidation is not only necessary but also critical for the markets as it would impart stability at higher levels to them. This would also be a period where the oversold position which existed in the market last week adjusts to the new normal. Market is still bearishly inclined and considering the fact that bears got mauled, they are still unwilling to give up. If the consolidation as expected as mentioned earlier does happen, it would give them time to readjust and draw fresh plans. Secondly in the space of a week would set up new plans for all the players and probably strategy on tackling Coronavirus may also emerge.

Stay on the side-lines in the coming week and allow markets to consolidate. The end of the week maybe a good time to build longs or take fresh positions. If, however markets dip in the intervening period. It could be a good idea to nibble at them when it does happen. To reiterate bide your time and allow markets to consolidate, or buy on dips in the coming week.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)