How do you see the markets on Friday 03rd December, after the sharp rise in the Nifty and Sensex on Thursday?

After the 183 points rally on Wednesday the Nifty rallied by another 234 points on Thursday closing above the 17,400 mark. The day belonged to the infrastructure plays like Adani Ports and Powergrid. The positives were the favourable A/D ratio at 47:3 and the VIX tapering by 7% to a more reasonable level of 18. That brings down the extent of panic in the markets.

Global investors continued to be persistent sellers on Thursday as the FPIs were net sellers on Thursday to the tune of Rs.910 crore in equities. However, domestic funds managed to offset this selling by buying stocks worth Rs.1,372 crore. For global investors the Star Insurance IPO getting a damp response could be an overhang.

In terms of global markets, there was a sharp 700 points rally on the Dow while the NASDAQ was up just about 30 bps. European markets reversed gains of Wednesday and closed in the red. The SGX Nifty is up 15 bps in early trades but the Star Health IPO outcome is an overhang and the macro risks cannot be ruled out. Also weekend selling could be visible.

There are likely to be two things which will be an overhang in the current market conditions. Firstly, the macro concerns over inflation and interest rates are still quite strong. Secondly, the measly 79% subscription for the Star Health IPO will mean that the IPO will have to wind down the size of OFS portion and that is not great news. It is time to remain cautious.