RIL, Airtel and futures expiry will put pressure on Nifty this week

• The ongoing adjusted gross revenue (AGR) dues case has brought RIL and Airtel under pressure and this could continue over the next week as well.
• August futures are also all set to expire this week, which could further add to the pressure on Nifty.
• However, market analyst Arun Kejriwal believes that the bulls could pile on the pressure on bears this month due to the market momentum.
• He also notes that the midcap and small cap segments are where the action is currently focused.

The week saw markets gain further ground with the breadth improving significantly. The midcap and small cap segments are where all the action is currently focused. BSESENSEX gained 557.38 points or 1.47%, while NIFTY gained 193.20 points or 1.73% . The broader markets saw BSE100, BSE200 and BSE500 gain 1.74% , 1.97% and 2.26% respectively. BSEMIDCAP gained 3.61%, while BSESMALLCAP was up 5.56% . While the benchmark indices had a decent showing, the breadth in the market was significant with none of the sectoral indices being tracked, closing in the negative. Further, the number of shares hitting upper circuits is on the rise and many have also hit new 52-week highs and some made lifetime highs as well.

The reason for this optimism is clearly liquidity and nothing negative seems to be on the mind of investors. The fact that the pandemic effect and consequences doesn't seem to hurt the optimism or the valuations of companies in the stock market. It could even be argued that people have discounted the same at this point of time and believe that FY 2021 is a wipe out.

The AGR issue affecting telecom companies took its toll on Reliance on expected lines. The share price of Reliance lost ₹32 or 1.51% to close at ₹2,082. The fall was insignificant but considering that the broad markets were up and Reliance has led this rally over the past four months, one would normally expect the share to be leading from the front. Another share that would be under pressure for the same reason in the coming week is Bharti Airtel which had acquired spectrum from Videocon and Aircel. The word acquired has different connotations and is used broadly here to indicate a lease agreement or even right to use or sharing system. With the Supreme Court veering around to the view that the dues would have to be paid by the current user of spectrum, Bharti could come under further pressure this week. Shares of Bharti lost ₹8.90 or 1.68% to close at ₹520 on Friday.

Yes bank shares remained in the trading zone talked about last week with a high of ₹16.40 and a low of ₹13.85. Shares closed at ₹15.57, a gain of ₹0.50 or 3.32% . This trading zone would continue for some time and one would have to see when the share sees a complete dry up of trading volumes or a huge spurt in volumes to indicate the change in trading zone.

The week ahead sees August futures expire on Thursday the 27th of August. The present value of NIFTY at 11,371.60 points is up for the month by 269.45 points or 2.43% . Compared to the previous month the gains lower and one would expect the bulls to pile on the pressure on bears considering that the market has momentum. With the rally becoming broader by the day it should be easier even though the benchmark indices may not gain as much as they have been doing in the recent past. Clearly as mentioned earlier the action has shifted to the mid and small cap segments.

Coming to Covid-19, the world has 233,83,472 affected people, 808,715 deaths and 159,10,371 patients who have recovered as on date. In India we have 30,44,940 affected people, 56,846 deaths and 22,80,566 recovered people. Compared to the previous week, the world saw 17,65,485 new patients, 39,709 deaths and 15,76,149 people recovering. In India, the number of people affected during the week increased by 4,54,439 people, deaths by 6,747 and 4,17,901 people recovered. The world is now waiting to see what is the effect of a second wave if it comes and how severe it is. No one knows for sure and they are waiting for two major developments, one a fool proof vaccine and second for this second wave. In either case one has to keep one's fingers crossed and hope for the best.

Coming to the markets in the week ahead, with momentum coming back to the markets, expect indices to gain further. While the climb in the benchmark indices is likely to be small, expect the action to continue in mid and small cap space. It is here that the retail investor has exposure and trading volume increase is noticeable. Different shares move up sharply and then become flat before falling ultimately. This is a time immemorial movement and one needs to be careful and avoid temptation. Take your gains and exit and don't expect to get the whole pie. Expect the broader market indices to once again outperform the SENSEX and NIFTY. Further expiry day and maybe a day before the event could get extra volatile.

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