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Markets made new intraday highs on the benchmark indices on all four trading sessions of the week. Closing highs were made in the first three sessions and then all hell was let loose on the last trading session which was Friday. 

What we saw was probably the first setback after the 4th of June. It broke the back and momentum went for a toss. What next is the question on everybody’s mind? 

BSESENSEX gained 85.31 points or 0.11 per cent to close at 80,609.65 points. NIFTY gained 28.75 points or 0.12 per cent to close at 24,530.90 points. 

The broader markets saw BSE100, BSE200 and BSE500 lose 0.55 per cent, 0.81 per cent and 1.06 per cent respectively. 

BSEMIDCAP was down 2.63 per cent while BSESMALLCAP lost 2.86 per cent. Suffice it to say that the colour of the markets was red on the trading screens. The IT and Tech sectors saved the market somewhat as they were big gainers, while Capital goods and metals were the big losers.

The intraday high made on Friday was 81,587.76 points on BSESENSEX while it was at 24,854.80 points on NIFTY. The losses that the markets suffered on Friday from their intraday highs were almost 1,000 points on BSESENSEX and 325 points on NIFTY. 

This kind of fall on virtually the eve of the budget sets up an interesting week with the budget on Tuesday and July futures expiry on Thursday. 

Volatility in the markets would rise sharply and there would be plenty of two-sided moves. Markets gained on three of the four trading sessions and lost on one.

The Indian Rupee lost 12 paise or 0.14 per cent to close at Rs 83.66 to the US Dollar. Dow Jones too had a very choppy and volatile week. It gained very sharply in the earlier part of the week and then fell equally sharply. 

In a week that saw the Dow gaining on three of the five sessions, we saw the Dow making an intraweek high of 41,221.98 points. Dow closed at 40,287.53 points, a gain of 286.65 points or 0.72 per cent. Here too the reversal was very sharp and hit the markets badly.

What triggered the setback in our markets and globally? People may blame it on the massive outage that took place in Microsoft Edge but that had no relevance. There was chaos in India as well and 100s of flights were cancelled on Friday and partly on Saturday as well. Normalcy returned thereafter. It only shows how vulnerable the world has become. 

Results season is on and the outcome is a mixed bag. After TCS results, Infosys results were declared and they were marginally better than the street expected. However, because of negative sentiments in the markets about Infosys, saw its share rise sharply. It gained Rs 81 or 4.73 per cent to close at Rs 1,791. The high it made was Rs 1,842, a loss of Rs 51 from the highs. During the weekend four banks and Reliance Industries have declared results. In the present circumstances these results do not enthuse the markets and they would not be able to change the sentiment and drive markets upwards.

The week ahead sees the budget being presented on Tuesday the 23rd of July. Expectations are that there would be announcement of some freebies and that income tax relief of Rs 50,000 or thereabouts would be announced at the bottom of the pyramid. 

Further, there would be some mention of allocation to build the new capital of Andhra Pradesh after Hyderabad became the capital of Telangana. An allocation of special status for Bihar would further dent the resources available. 

While the buoyancy of revenue collection and the economy which is in fine fettle would increase allocable money for the FM, it would be a tightrope walk to balance the expectations of all stakeholders. Probably allocation to growth-driven infrastructure could see some hit. All of this could see the budget being a mixed bag from the market’s perspective.

One possible view that emerges post the budget is, that there is no negative surprise and hence it is positive, could rally the markets. Otherwise by and large it could be a neutral budget from the market perspective. In any case, the biggest concern in the markets currently is valuations and they are skewed and tend to be in the expensive and uncomfortable zone.

Post the budget presentation we have July futures expiry on Thursday the 25th of July. The present level of NIFTY at 24,530.90 points is higher by 486.50 points or 2.02 per cent. While the lead favours the bulls currently, the fact that Friday saw an intraday fall of close to 325 points, the lead is not much. Further, the Budget in the middle could see sharp volatility. While currently, the bulls have the upper hand, things could over the next four days change completely.

In primary market news, we have the issue from Sanstar Limited during the week. The issue opened on Friday the 19th of July and would close on Tuesday the 23rd of July. The issue consists of a fresh issue of 4.18 crore shares and an offer for sale of 1.19 crore shares in a price band of Rs 90-95. 

The company is in the business of processing maize for use in food, pharma and cattle feed. The PE multiple for the company is between 18.95 to 20.00. The main object of the issue is to increase the present capacity by almost double. This capacity would be available by the end of the current financial year. With present capacity utilisation at a high 80 per cent level, there is little scope for growth in the current year. With dilution, there would be an impact on earnings.

While there is a grey market currently in the shares, they do change as the issue progresses and lists. Investors with a long-term view could take a look at the share once it is listed for some time, and then take a call.

Coming to the markets in the week ahead, expect them to be choppy and volatile with two events ahead. The budget and July futures expiry will keep them in the thick of action. The strategy would be to continue to take money off the table and allow the budget to sink in over the next couple of days. 

FPIs have been giving confusing signals with their buying and selling alternating overtime over the last month or six weeks. Geo-political news over the last 24 hours is also a cause of worry. In such a fluid position ahead of important events, it becomes that much more imperative to have a light position and allow events to unfold.

In conclusion, allow events to unfold and then take action. Trade cautiously.