Tough week ahead for markets; US FED meeting holds the key

By Arun Kejriwal

New Delhi, March 19: Markets were volatile last week not only in India but globally. There were sharp moves on both sides and one saw intraday gains and losses being erased and markets closing in the opposite direction. Global banking was what kept everyone on their toes.

After Silicon Valley Bank followed by Credit Suisse, it’s the turn of First Republic Bank. As mentioned last week, can this become a contagion? The situation is too fluid as of now, but there are concerns and the important point coming out is the close link with crypto with these banks and the banking sector.

The BSESENSEX lost on three of the five trading sessions and gained on the remaining two. The losses were on the first three days of the week followed by recovery.

BSESENSEX lost 1,145.23 points or 1.94 per cent while NIFTY lost 312.85 points or 1.80 per cent to close at 17,100.05 points. The broader indices saw BSE100, BSE200 and BSE500 lose 1.69 per cent, 1.68 per cent and 1.75 per cent respectively.

BSEMIDCAP lost 2.06 per cent while BSESMALLCAP lost 2.81 per cent. In the previous week the midcap and Smallcap indices had actually gained while the benchmark indices and the broader indices had all lost. Probably playing catchup, but this is where the pain still lies.

The Indian Rupee lost 51 paisa or 0.62 per cent to close at Rs 82.55 to the US Dollar. The Dow Jones was volatile and lost on three alternate days while gaining on the remaining two. It ended the week on a losing note and was down 47.66 points or 0.15 per cent at 31,861.98 points at close. Friday saw Dow lose 384 points.

The banking industry is in a turmoil with many banks facing the heat post SVB and Credit Suisse. First Republic Bank is yet another facing the heat. In such a situation, the US FED would be meeting between Monday the 20th of March and Wednesday the 22nd of March for its meeting to review interest rates. Prior to the SVB crisis, the expected rate hike was likely at 50 basis points, but now the street has discounted the same to 25 basis points.

What would be the actual hike is unknown and what is even more intriguing is how the street would behave if the rate hike is different from the expectation. Suppose it is 50 basis points, would markets tank? Only Wednesday would give clarity and till then global markets would be cautious and on tenterhooks.

The primary markets seem to have gone in slumber. At the beginning of the month there were expectations that half a dozen issues would hit the market in March. With 20 days gone, there is nothing that appears likely and it would be interesting to see which company ventures in these uncertain times. The financial year is coming to an end and money markets as usual have become very tight for a short period of time till the year end.

As far as FPIs are concerned, they seem to be sellers on most days and have sold on the last seven trading sessions continuously. With rising interest rates and dear money, the possibility of them remaining sellers continues. The lows intraday during the week were 57,158.69 on BSESENSEX and 16,850.15 points on NIFTY, while the highs made were 59,510.92 points and 17,529.90 points. The range is huge and gives a feeling that there is a certain amount of uncertainty and nervousness in the marketplace.

Coming to the markets in the week ahead, expect markets to remain volatile and uncertain. Sharp movements would be the order of the day. Two sided movements during the week would be expected and the week is likely to close with a negative bias. However, there would be attempts to take the market up based on news flow.

The budget day lows were decisively broken this week and we need to seek new levels of support. Key support for the market would now be around 16,900-16,950 on NIFTY and 57,400-57,550 on BSESENSEX. These are marginally higher than the intraweek lows. This would be followed by support at 16,600-16,650 on NIFTY and 56,500-56,650 on BSESENSEX. These levels are likely to hold for the week unless something unexpected happens post the FED meeting in the US.

On the resistance side, the first level is 17,300-17,350 on NIFTY and 58,600-58,750 on BSESENSEX. The next level would be the intraweek highs made last week at 17,529-17570 on NIFTY and 59,510-59,650 on BSESENSEX.

The strategy for the week would be to sell on rallies and avoid overnight exposure. Focus on just intra day trades and as far as possible avoid any positions at the end of day on Wednesday before the FED meeting. Use rallies to sell and allow the markets to find their own levels. The week would be yet another with losses at the end of it all.

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