BSESENSEX lost 741.87 points or 1.26 per cent to close at 58,098.92 points while NIFTY lost 203.50 points or 1.16 per cent to close at 17,327.35 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.21 per cent, 1.25 per cent and 1.23 per cent respectively. BSEMIDCAP lost 1.12 per cent and BSESMALLCAP lost 1.23 per cent. The midcap and Smallcap sectors saw sharp selling and value erosion on Friday which are not reflective of what the index lost.
The Indian Rupee was under pressure along with the global currencies after the FED had raised interest rates. The rupee lost a massive Rs 1.25 or 1.57 per cent to close at Rs 80.99 to the US dollar. Dow Jones hit a new 52 week low at 29,250 points. Dow lost 1,232.01 points or 4 per cent to close at 29,590.41 points. Dow gained on just the first day of the week and lost on the remaining four days.
FED raised interest rates by 75 basis points on expected lines. The new rate band is now 3.00-3.25 per cent and the FED is on track to have an interest rate of around 4.4 per cent by the end of calendar year 2022. There would be two more meetings in November and December. The impact of this rate hike would be felt on credit card debt, automobile loans, mortgages and variable rate loans. Very clearly this would hit the common American as they typically live on credit card spends and EMI’s.
There are no primary issues in the week ahead. We are probably going to see some action from the first week of October onwards. Shares of highly subscribed Harsha Engineers International would be listed on the bourses on Monday the 26th of September. The issue was subscribed a massive 74.7 times. This is a record under the new guidelines effective from 1st September where ASBA or blocking of funds is to be done on the same day. This was to prevent the large scale of applications being returned as their funds would not be blocked.
This brings us to an interesting observation and action point by SEBI. With blocking of funds happening within the bidding period, there is no reason for shares to list on the sixth working day after closure of the issue. It should certainly happen by the fourth day and thus save two days in the cycle. This would reduce price manipulation post closure of issue and also help in reigning in rampant speculation. Hope SEBI in its next meeting slated for the September month end does take up this point for consideration.
The week ahead sees RBI meet for its monetary policy meeting between the 28th to 30th of September. A rate hike is imminent but the jury on how much is not yet clear. Considering the fact that every Central Bank across the globe who has met has raised interest rates, expect RBI to do so in the range of 40-50 basis points.
Thursday the 29th of September sees September futures expire. It has been a choppy month and the high of the series was made a week ago at 18,096 points while the low was made last Friday at 17,291 points. At the current level of 17,327 points, the series is down by 195.10 points or 1.11 per cent. Another way of looking at the series is that the losses of last week is what the series is down by, as prior to last week it was quits on the series. Expect markets to remain choppy and volatile as the series ends in the next four days.
Coming to the markets in the week ahead, there would be nervousness and high volatility. Dow having hit a new low, RBI policy meet and imminent rate hike would act as a dampener for markets. In terms of support, immediate support exists at 17,150-17,200 on NIFTY and 57,600-57,750 on BSESENSEX. If this is violated, we have the next level of support at 17,000 and 57,150 points respectively. Resistance exists at the levels of 17,650-17,700 and 59,100-59,250 points. The previous week’s top was the strongest resistance at 18,100 and 60,676-60,700 points. With the quarter coming to an end this week, expect people to start talking about results next week onwards.
The strategy for the week ahead which has expiry and RBI meet would be to refrain from carrying forward positions at end of day. After consecutive sharp losses in the DOW over the last two weeks, people would look for a bounce there. In case that happens, even our markets would have a rub off effect. While FPI have been sellers over the last three sessions, they have by and large remained neutral in September with net sales of Rs 2,445 crore in the month so far. Sell on sharp rallies and accumulate on dips. The risk to reward ratio would be in favour of buying on sharp dips.
(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)