Look at stock ideas and individual companies in the coming year

THE market was volatile and yo-yoed on expected lines. The week ended on a positive note with the BSE Sensex gaining 212.67 points, or 0.64 per cent, to close at 33,462.97 points. The Nifty gained 67.60 points, or 0.65 per cent, to close at 10,333.25 points.

The buoyancy on Friday when markets jumped was post the exit polls by various TV channels and media houses. These polls showed the BJP winning Himachal Pradesh from Congress and continuing to rule Gujarat. The margin of victory predicted varied from just about winning to even more than two-thrid majority in Gujarat. The outcome of Himachal appears to be unanimous.

The market has factored in the BJP win and its winning is unlikely to change the current market levels. The setup, as envisaged two weeks ago On Dec 18, is nicely playing out. The lifetime high on the Sensex was 33,865.95 and on the Nifty, 10,490.45 points. To cross these levels, one needs the margin of victory to be better than what the BJP won in 2012. In absolute terms, the distance to new highs is less than a day’s move. The party needs to go past 130 seats out of 182. If that happens there would be euphoria which would last for about two-three days and should take the market past the previous all-time highs made on Nov 7. On the flip side, if the margin of victory is reduced or lower, we could see a sell-off as now the base is set at or around 110 plus-minus five seats.

Valuations have become extremely expensive and almost all the people who matter in the market believe that returns of 2017 will not be matched in 2018. This implies that post-Monday event, there would be profit taking two-three days later or a sell-off beginning Monday itself. Brace for either of the events and use them to get into cash, as plenty of opportunities would be available subsequently.

In global news, Dow continued to make new highs and gained 322.58 points, or 1.31 per cent, to close at 24,651.74 points. The US Fed has raised interest rates for the third time in the calendar year 2017 and indicated that it would do so thrice in calendar year 2018 as well. The rates now stand between 1.25 per cent and 1.5 per cent. This would signal that cheap interest rates are a thing of the past and global markets would have to provide better returns for investments to happen.

Shares of Shalby Limited, the hospital chain, listed and had a poor start, closing with losses of 3.5 per cent. The share, which was issued at Rs 248, closed on its debut day at Rs 239.25, a loss of Rs 8.75, or 3.53 per cent.

The calendar year is coming to an end and we are entering the last fortnight. While the election results would be good to keep the market volatile for the first three days, it would be NAV (net asset value) in the last week that would add to the volatility.

This volatility should only be used to sell, as the prices of some of the less traded or illiquid shares could see unexpected movement.It’s also that time of the year when one can look at the portfolio and decide on a strategy for the coming year.

While the year gone by would have delivered returns of over 25 per cent as on date, one needs to temper the expectations for the next year to maybe a half or lower. One should look at stock ideas and individual companies rather than sectors in the coming year. Money making opportunities would be available, but with a greater degree of patience and some amount of research.

Await the results later in the morning and use volatility to your advantage.

(The author is founder, Kejriwal Research and Investment Services)

Arun Kejriwal