Will IT bring about a market correction

MUMBAI: The week went by and had four trading sessions and gained on all four of them. What was significant was the fact that the daily gains seem to be getting smaller and markets are giving a sense of tiring out. They seem to be struggling to gain at close.

BSESENSEX gained 598.03 points or 1.00 per cent to close at 60,431.00 points while NIFTY gained 228.85 points or 1.30 per cent to close at 17,828.00 points. The broader indices like the BSE100, BSE200 and BSE500 saw the markets gain 1.28 per cent, 1.33 per cent and 1.34 per cent respectively. BSEMIDCAP was up 1.52 per cent while BSESMALLCAP gained 1.53 per cent.

The Indian Rupee gained 3 paisa or 0.04 per cent to close at Rs 81.85 to the US Dollar. Dow Jones gained on three of the five trading sessions and lost on two. It ended the week with gains of 401.18 points or 1.20 per cent to close at 33,886.47 points.

Retail inflation (CPI) in March was at 5.66 per cent against 6.44 per cent in the previous month. IIP or industrial growth in February was at 5.6 per cent against 5.4 per cent in January. Looking at the numbers on inflation and IIP, the decision of the RBI to take a pause in raising interest rates becomes a brilliant move. The move was well timed and gives the economy time to wait for the outcome of the monsoon.

Results season has begun and it could be said that the beginning is not the best one could have hoped for. While TCS was slightly below expectations, at the end of it all the result could be termed as overall acceptable. However, the result from Infosys was disappointing and the guidance for the next year 2023-24 was even more disappointing. Expect the share to be under pressure when trading resumes in the coming week.

The week ahead would see the listing of Avalon Technologies Limited on Tuesday (April 18). This is likely to be followed with Mankind Pharma Limited tapping the capital markets with its IPO which would conduct its roadshow in the middle of next week. The issue is a mega issue and would be in the region of around Rs 4,500 crore. The company had reported an EPS of Rs 35.78 for the year ended March 22. As per street expectations, the price band would be a four-digit number in the region of Rs 1,000 plus minus Rs 50. The top line reported was around Rs 8,000 crore and the net profit after tax was about Rs 1,450 crore for the period ended March 2022.

I strongly believed that markets were expecting a lot from the annual results to be declared this time around. If this is the beginning, then one may have to either wait for a series of good results or would by force have to change expectations from results for the year.

We have had a good three-week rally from the lows made towards the end of March. The ensuing rally has been fast and furious. While one expects markets to typically pause for breath or undergo a correction, nothing of that sort has happened in our markets. Maybe the poor set of numbers from Infosys may trigger the correction.

Key resistance for the markets would be at 17,850-900 on NIFTY and at 60,550-60,700 on BSESENSEX. If these are breached, then the next levels would be at 18,050-18,100 and at 61,100-61,250 points. On the support side, the immediate levels are at 17,550-17,600 and at 59,800-60,050 points. In case this is breached the next levels would be at 17,250-17,300 and at 58,800-58,950 points.

The strategy for the week would be to use rallies to sell and buy on sharp dips. While over the last week, my expected correction did not happen, it's likely to happen this week. Trade cautiously.