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Markets under pressure and looking vulnerable: Arun Kejriwal

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Over the past week, the markets gained in three out of five trading sessions, but lost significant ground. The start of a new futures series in September was also a mixed bag, with the series starting off with a bang but proving to be pretty much positive by the end of the day.



BSESENSEX lost 812.28 points or 1.36 percent to close at 58,833.87 points while NIFTY lost 199.55 points or 1.12 percent to close at 17,558.90 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 1.00 percent, 0.85 percent and 0.65 percent, respectively. BSEMIDCAP was up 0.61 percent, while BSESMALLCAP was up 0.85 percent.

The Indian rupee lost 6 paisa or 0.08 percent and closed at Rs 79.86 against the US dollar. Dow Jones had a scorching week and was under pressure. It lost on three out of five days and Friday was literally a meltdown when it lost just over 1,000 points. It lost 1,008.38 points after FEED Chair Jerome Powell reiterated that they are on track to reach interest rates between 3.75 percent and 4 percent by the end of the calendar year. This means that the next rise in September would be 75 basis points and the next one in November could be up 50 basis points. The final and final meeting in December would decide where interest rates end at the end of the year. Currently, interest rates in the US are between 2.25-2.50 percent. This statement from Powell caused the markets to plummet as they built in a softer rate hike over the past two weeks.

The impact of what happened in the US on Friday will be felt around the world when they resume trading on Monday.

Our markets will be closed for holiday on Wednesday 31 August due to Ganesh Chaturthi, the day when Lord Ganesh is brought home. It used to be a celebration in Mumbai and Maharashtra, but now it is a national event. This would break trading momentum and as it is a midweek break any meaningful rally would be hard to sustain.

In primary market news, it was a blockbuster Friday with one listing and one issue closing for subscription, and both did very well.

The listing of Syrma SGS Technology Limited, which had issued shares at Rs 220, closed its first day at Rs 313.05. The script got Rs 93.05 or 42.5 percent. The stock traded briskly and it was a little surprising that no names of people who had bought the stock were reported at the end of the day.

The issuance of Dreamfolks Limited, which had tapped the markets with its sale offer of 172.42 lac shares in a price range of Rs 308-326, was closed. The issue was open from Wednesday 26 August to Friday 28 August. The issue was subscribed 56.67 times, with the QIB part being subscribed 70.53 times, the HNI part 37.66 times and the Retail part 43.60 times. The issue received a favorable rub-off from Syrma SGS’s subscription and performance. Whether this is repeated in future releases would be something to be watched closely.

Issues opening from September 1 would mark a change in the way funds are blocked from bids made through brokers. Nearly all issuances over the past 12 months have seen investors bid for shares on the last day and then, depending on the final subscription, take a call as to whether to lock their money against the offer or let it expire. This resulted in many subscribed IPOs actually ending up as signed and being saved by reducing the offer for sale component. In one issue, the merchant bankers had to contribute to the shortfall through the underwriting agreement. This would no longer be possible. It would be interesting times in the markets.

In the coming week we have a midweek trading holiday on Wednesday that would break the momentum. Last week’s highs of 60,400 and 18,000 would act as very strong resistances to any gains the markets make, while levels of 58,200 and 17,400 would act as immediate support. However, if the markets break through these support levels, we should soon see another sharp drop of perhaps another 2 percent in the benchmark indices. The new support could then be around 17,000 on NIFTY and 57,000 on BSESENSEX. The big concern now would be the FED announcement and the fact that the US market, which fell 1,000 points on Friday, is now becoming a cause for concern.

The strategy would be to buy on really sharp dips and sell on any rallies.

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

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