Markets need consolidation before next up move

New Delhi, Dec 17: Markets in the week gone by opened on a quiet note and then took a cue from the US markets and just shot through the roof.

They were up sharply for the third week in a row and have now moved from just short of 66K on BSE Sensex on November 24 to 71.5 K on December 15. The gain 5.5 K or a massive 8.33 per cent. In the same period, Nifty has moved from 19.8 K to 21.5 K, a gain of 1.7 K or 8.58 per cent.

This is indeed a remarkable rise. Each week's rise had different reasons.

The first week which was from November 27 to December 1 was on account of the exit polls for the five state elections.

The second week from December 4 to 8 was on account of the state election results and the realisation that the ruling party in the centre would be in pole position for the general elections due in April-May 2024.

The third week from December 11 to 15 was primarily on news from the US that the FED would pause on the rate hikes and there could be as many as three rate cuts in the coming year. Dow had a stupendous rally post this indication.

In India, we saw markets gain in four of the five sessions. BSE Sensex gained 1,65815 points or 2.37 per cent to close at 71,483.75 points while NIFTY gained 487.25 points or 2.32 per cent to close at 21,456.65 points. The broader markets saw BSE 100, BSE 200 and BSE 500 gain 2.36 per cent, 2.33 per cent and 2.32 per cent respectively. BSE Midcap gained 2.57 per cent while BSE Smallcap was up 2.38 per cent.

The Indian Rupee gained 38 paisa or 0.46 per cent to close at Rs 83 to the US Dollar. This was a sharp gain and probably the best during the calendar year 2023. Dow Jones had a spectacular week and is now trading at the best levels achieved during calendar year 2023. Dow gained on all five trading days of the week and was up 1,057.29 points or 2.92 per cent to close at 37,305.16 points. On a year-to-date basis, Dow is up 12.54 per cent for the year. This is a far better performance than what was witnessed last year when Dow had negative returns of 8.78 per cent.

One important factor which needs to be considered is timing. Markets made a short term bottom the day FPIs sold aggressively. On October 26 their net sale in the cash market was Rs 7,700 crore and during the entire month it was negative Rs 29,000 crore. On Friday (December 15), FPIs bought equity worth Rs 9,239 crore and so far in December they have bought equity worth Rs 29,733 crore.

Similarity is uncanny and does give some cause for taking notice and exercising caution. Probably its time to expect some profit-taking, some pullback action and correction at higher levels after a fantastic run over the last three weeks.

The present run in IPOs is unabated. You now have more than one IPO opening every day of the week and things could not be tighter. In the coming week we see the issue from Muthoot Microfin Limited is tapping the capital markets with its fresh issue of Rs 760 crore and an offer for sale of Rs 200 crore. The price band is Rs 277-291.