Sentiment and momentum favour the bulls in a truncated week

MUMBAI: The week gone by had all the emotions one could think of. It had drama, expectation, new vigour, a desire to do something and above all momentum.

What one saw on Friday was a combination of the first day of the new financial year, a renewed push by bulls to dominate, a large part of NAV supported by mutual funds and above all, hope that the new financial year would be a better one. To support all of this, Dow had a great week as well.

The markets gained on three of the four trading sessions and were sideways on the fourth session. Friday was a special day with markets registering huge gains.

BSESENSEX gained 1,464.42 points or 2.55 per cent to close at 58,991.52 points while NIFTY gained 414.70 points or 2.45 per cent to close at 17,359.75 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.32 per cent, 2.08 per cent and 1.95 per cent respectively. BSEMIDCAP was up 1.83 per cent while BSESMALLCAP was up 0.71 per cent.

The Indian Rupee gained 31 paisa or 0.38 per cent to close at Rs 82.17 to the US Dollar. Dow Jones had a great week and gained on four of the five trading sessions. It was up 1,036.62 points or 3.22 per cent to close at 33,274.15 points. Dow has rallied smartly ever since the US FED raised interest rates on Wednesday the 22nd of March. Keep fingers crossed how long the same mood continues.

March futures expired on Wednesday the 29th of March, a day earlier, as Thursday was a trading holiday. Though markets gained on Wednesday and we saw a smart rally and substantial short covering in the last hour of trading, it was enough to recover the series. There was a pullback from the lower levels. At the end, the March series lost 430.55 points or 2.46 per cent to close at 17,080.70 points.

Coming to the all-important trading on Friday which changed the mood on the street, it was a game changer day. Over the last couple of days, analysts have turned bullish on Reliance Industries which is the leading bellwether stock. This is one company which with its sheer weight in the indices has the capacity to change the momentum and mood in either direction.

The media and analyst reports coupled with the corporate announcement of the company calling an EGM on the 2nd of May to split the share and demerging Jio Financial Services Limited from the company in the ratio of one for one was enough to lead the market from the front. The share gained Rs 95.80 or 4.29 per cent to close at Rs 2,331.05 for the day. For the week, the share gained Rs 127 or 5.76 per cent. It's not every other week that Reliance, a big heavyweight moves almost 6 per cent in a week.

The primary markets have not been very kind and fundraising in 2022-23 has taken a beating. There were 37 companies which tapped the markets during the period and raised Rs 51,000 crore against 53 companies which did so in the previous year and raised Rs 1.11 lakh crore. What is really disheartening is the performance of these companies which has left a lot of questions unanswered from the promoters and merchant bankers who brought these companies to the market. One hopes that the issues coming to the market in 2023-24 leave something for investors to feel happy.

There is one IPO coming up in the period ahead. Avalon Technologies Limited is tapping the capital markets with its fresh issue for Rs 320 crore and an offer for sale of Rs 545 crore. The issue opens on Monday the 3rd of April and closes on Thursday the 6th of April. The price band is Rs 415-436. The company is a leading fully integrated Electronics manufacturing (EMS) player with end-to-end operations in delivering box build solutions in India. The focus is on high value precision engineered products.

The company reported revenues of Rs 840.72 crore for the year ended March 22 and a net profit of Rs 68.16 crore. For the eight-month period ended November 2022, revenues were at Rs 584.78 crore while net profit was Rs 34.18 crore. The EPS for the year ended March 22 was Rs 11.30 while for the eight-month period not annualised it is Rs 6.10. Based on the full year March 22 earnings, the PE ratio is 36.73-38.58 times. The business of the company is niche and it is a small player in a very big pond which has huge opportunities.

With an order book that is greater than its annual turnover it would be looking to expand its facilities and has already got a 1.5 lakh square feet facility ready for the same. This company could be compared with similar players like Kaynes Technologies and Syrma SGS who are in the similar box-built business. Avalon does not have any B-to-C products; hence the name is not visible or familiar unlike Kaynes or Syrma who have products which are ultimately used by consumers. Investment in this company is warranted for a medium to long term perspective.

RBI meets for its policy review for the first time in the financial year 2023-24. The meeting between Monday the 3rd of April to Thursday the 6th of April, has been extended from the customary three-day meet because of the Tuesday holiday. It is expected that the repo rate would be hiked by 25 basis points to reach a level of 6.75 per cent. Anything more or less than this could impact the markets, but this hike has been already discounted.

Coming to the week ahead it is a very short week with just three trading sessions. Tuesday is a mid-week holiday and the weekend comes early with a Friday holiday. While Tuesday is an Indian holiday, Friday is a global holiday. Momentum may or should get affected this week as a result of the Tuesday holiday.

Markets have had a great run in the last week and it would be expected they continue their run for some more time. Volatility and sharp movements would be the order of the day. A note of caution however would be that we have just commenced a new series for the month of April and the outstanding open positions are not very large and with Friday's gains is virtually one sided. If for any reason there is profit taking, or selling, the fall can be precipitated with virtually there being no shorts.

Key resistances would be at levels of 17,550 - 17,650 on NIFTY and at 59,600 - 59,900 on BSESENSEX. With just three trading sessions this may be a good target to be reached during the week. On the support side, levels of 17,050 - 17,100 on NIFTY and 58,100 -58,150 on BSESENSEX. This level should hold as momentum and optimism in the market would allow support to come in at these levels.

The strategy would be to remain light at the end of the day on Monday because of the ensuing holiday and trade intraday. Keep an eye on the US and European markets as they would dictate the trend. With the new results season to kick in, eyes would turn once again to them as they start to kick-in from the following week. Trade light and cautiously.