Markets to continue to gain ground in truncated three-day week

Markets opened with a bang on unexpected news of the HDFC Bank and HDFC Limited merger announcement on Monday morning. Thereafter markets corrected themselves and gained again only on Friday. At the end of the week, they closed with gains.

BSESENSEX gained 170.49 points or 0.29 per cent to close at 59,447.18 points. NIFTY gained 113.90 points or 0.64 per cent to close at 17,784.35 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.37 per cent, 1.54 per cent and 1.70 per cent respectively. BSEMIDCAP gained 3.52 per cent while BSESMALLCAP was up 3.72 per cent.

The Indian Rupee lost 11 paisa or 0.15 per cent to close at Rs 75.90 to the US Dollar. Dow Jones lost 97.15 points or 0.28 per cent to close at 34,721.12 points.

The unexpected announcement about the HDFC Twins merger came as a surprise and saw markets led by the twins registering huge gains. The gains on Monday saw BSESENSEX rise 1,335 points. Of this rise, HDFC Bank gained Rs 150.15 or 582.10 points while HDFC gained Rs 227.95 or 365.56 points. Effectively the twins combined gained 947.66 points or almost 71 per cent of the rise in the BSESENSEX. Over the course of the week, these gains were given up. At the end of the week, HDFC was up Rs 7 or 0.29 per cent while HDFC Bank was up Rs 9 or 0.60 per cent.

RBI in its bi-monthly review meet kept key policy rates unchanged on expected lines. While the US FED is toying with the idea of a sharp increase in the next meeting of 50 basis points, the rates in India were kept unchanged. RBI wants to keep a check on inflation and is working on maintaining the same in a tight band.

Invesco, the investor who had a major dispute with Zee and the management sold 7.4 crore shares or 7.8 per cent equity in ZEE Entertainment. While the buyers of the shares were not known from details available on the stock exchanges, this surely puts to rest the long pending dispute and opens up the acquisition by Sony of the company.

Shares of Ruchi Soya Industries Limited sold through its follow-on offer of Rs 4,300 crore listed on the bourses and created history. The shares were allotted at Rs 650 which was a steep discount to the traded price at the time of the FPO. People felt that the difference would narrow significantly. None of this happened. The discovered price was Rs 855 on NSE and Rs 850 on BSE. The share closed even higher at Rs 923.45 and Rs 925 respectively. This gives gains of Rs 273.45 or 42.06 per cent to investors.

Readers would recall that SEBI had asked the company to give an exit route to investors who had applied in the issue for two days. The overall subscription in the issue which was subscribed 3.80 times had reduced to 3.60 times. Even at the listing price of Rs 855, the returns were 31.5 per cent. These returns are unparalleled in the stock market of any company which has issued shares through a follow-on offer and even more so the fact that the public holding has increased from 1.2 per cent to roughly 19 per cent.

Post the issue, the company has retired all debt and is now a debt free company. Further it has announced that it would dilute its shareholding by another 6-7 per cent to achieve the minimum 25 per cent shareholding required before December 31. With this performance, the face of the company Baba Ramdev has already prepared the launch of the public issue from Patanjali at a later date.

In geo-political news, Imran Khan the Pakistan PM lost in a vote of no-confidence after massive drama. He continues the track record of no PM in Pakistan ever completing his full term. He also becomes the first PM to be ousted from office through a no-confidence motion. On the Russia-Ukraine front, the never-ending war just continues. It's already 46 days old. There is no negotiation or settlement anywhere on the horizon.

Coming to the week ahead expect markets to continue their upward trend with corrections. The week gone by saw the BSESENSEX make a high of 60,786 points and a low of 58,876 points during the course of the week. Similar levels on the NIFTY were at 18,114 and 17,600 points. For the week ahead expect markets to trade higher. The lows of the previous week would act as strong supports while the levels of 61,000 on BSESENSEX and 18,300 points on NIFTY would act as resistances. The movement witnessed in the Smallcap and midcap space are indeed encouraging and would help the depth of the market to improve.

The trading strategy for the week should be to continue to buy on dips and sell on strong rallies. As the trading week has two trading holidays on Thursday and Friday, the volatility could be sharp and movement swift. Be prepared for profit taking if markets rally on all three days as Thursday would be a holiday exclusive to India while Friday would be a holiday in the US as well. Trade cautiously.