Short positions into expiry week could see increased volatility and movement

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Markets gained on three of the five trading days last week but registered very strong gains on the last two days of the week to end with gains of almost 2.8 per cent. BSESENSEX was up 950.84 points or 2.81 per cent to close at 34,731.73 points while NIFTYY gained 271.50 points or 2.72 per cent to close at 10,244.40 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.44 per cent, 2.45 and 2.53, respectively. BSEMIDCAP was up 1.62 per cent while BSESMALLCAP was up 3.65 per cent.

The Indian Rupee lost 34 paisa or 0.45 per cent to close at Rs 76.18 to the US$. Dow Jones at the end of a volatile week manged to end in positive territory gaining 265.92 points or 1.04 per cent to close at 25,871.46 points.

Ever since the introducing of weekly settlements on futures in NIFTY and Bank Nifty, the markets have become significantly more volatile and trading on Thursday in the second half of the day is fraught with risk and huge uncertainty. Last Thursday was no exception and the shorts in the market were squeezed out.

Thursday the June 25 will see June futures expire. The current value of NIFTY at 10,244.40 points is higher by 754.30 points or 7.95 per cent. It's a huge lead and bulls are unlikely to squander it away. As mentioned earlier there is a short build-up in the market considering the spate of negative news flow globally and nationally whether it be the Indo-China conflict, 'Black lives matter' protest in the US and now having a symbolic protest worldwide with respect to racism and of course the pandemic covid19. In normal circumstances, one would expect in such a scenario, markets to be subdued if not under severe pressure. Here we see markets not only doing well but moving up.

The current level of BSESENSEX of 34,731 is lower than the opening level of 1st January 2020 of 41,253 points by 15.8 per cent. The low of the year so far has been 25,638 points which meant at that point the BSESENSEX was down 60 per cent from the beginning of the year. From the low we have recovered and made up more than half the losses. This shows the resilience and belief that all that is happening will be surmounted.

Reliance claims that it has become net debt free company well ahead of its commitment. There are various views on this as the amount that is to be received from the rights issue of about Rs 53,000 crs would be in two tranches of 12 months and 18 months from now. The company has received just a fourth of this amount so far and would receive another fourth in May 2021 and the balance half in November 2021. Shares of the company gained Rs 171 or 10.76 per cent during the week to close at Rs 1,760.

The uncertainty on landlords and tenants with regards to rent during the lockdown period saw some clarity with regard to DLF writing to its customers in the NCR region. The company has proposed a scheme where it is willing to write of the rent for the lockdown period and offered a discount for the period from June to March 2021 in a staggered manner linked to sales. They have offered different terms to malls and to people who have offices in their complexes. This should set the path to some sort of reconciliation on a very contentious issue.

Glenmark has become the first Indian Pharmaceutical company to receive regulatory approval for oral antiviral 'Favipiravir' for mild to moderate covid-19 treatment. Shares of Glenmark have risen from Rs 354.90 on the last day of May to Rs 409.10 as of Friday June 19, gaining Rs 54.20 or 15.27 per cent. There could be more steam in the counter but almost everything is in the price. Remember the saying, buy the rumour sell the fact.

Coming to the covid-19 front, the number of affected people globally has moved up to 89.22 lac people with 4,66,871 deaths and 47.43 lac people having recovered. In India the number of patients is 4,11,773 people with 13,281 deaths and 2.28 lac people having recovered. Mumbai with over 64,000 patients and Delhi with 56,000 people lead the tally in India.

Compared to a week ago, the number of new patients globally has increased by 12.37 lakh with 34,230 deaths while 6.94 lakh people have recovered. In India the number of new patients has increased by 89,900 while there have been 4,077 deaths and almost 66,000 people having recovered.

Coming to the markets and the week ahead, there would be volatility and sharp two-sided moves. The bulls would like to press home their advantage and carry the series with a decent 8 per cent gain as of date. There are shorts in the market with all the negativity around. Further with the breath of the market improving significantly, a section of the market men has used their longs in the midcap and Smallcap space and as a hedge shorted the benchmark indices. Come Thursday all of this would get squared off or rolled over. Either way volatility is imminent. The best possible strategy would be to book profits as the markets continue to rise. Remember there is always that bad day when nobody wants to buy.

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

--IANS

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