Sunday, August 30, 2020

2020 H2 and beyond: where are our markets headed to?

 The first half of the year has gone by and there has been lot of chaos and confusion since my last post. Covid 19 has wrecked havoc. My level of 10000 was comfortably violated and much more. Let us see what can happen in the future.

1. The market is awash with liquidity and disconnected with ground reality. Covid 19 blazes on relentlessly. I expect the markets to move up maybe make new highs and then re test the previous lows or 6500.

2. The markets will remain buoyant in the near future as the US Fed also is pumping in huge liquidity. Next few months will be very good for traders.

3. One must trade also only in blue chips else one can lose one's capital.

4. Gold remains a safe haven and is a buy on dips as a hedge.

5. US Presidential elections are a key turning point and if Trump loses or if there is chaos after the results the markets will nosedive.

The key things for a sustained bull run are:

1. Cure for Covid

2. Stable US Government

3. Stable Indian economic policies

Right now only point 3 is somewhat under control. The run up is factoring in that a cure for Covid is given, things will normalize. If bad loans start popping up as they will after the next quarter results, then the markets will correct.

It is a traders market not an investors markets. Use the rally to throw out laggards.

6350 were multiple tops in the past they will be strong support. 12400 will now be the new resistance points.

Sunday, January 5, 2020

2020 - What does it bring for the Indian Equity Markets?

A new year and a new beginning awaits the equity markets. India is on the cusp of a major structural change. The reforms initiated by the Modi Government will now start bearing fruits. Let me summarize what I expect from 2020.

Fundamentals:

1. The Budget will try and put more money in the hands of the tax payers. Expect simplification of the tax structure. As it is the tax payer base is low so it does not make sense to penalize the honest tax payer.

2. Expect the Cess on petrol and diesel to go up as it should be. Everyone fills petrol and diesel so everyone pays taxes. The black or white money debate is extinguished smoothly.

3. Expect disinvestment of PSUs. The Government has no business in running businesses and it should rightly step away.

4. Expect more pain in the short term but a bright long term future. Fast Tag is the best thing which was implemented in 2019. Leakage of revenue is stopped and transparency will be brought in.

5. Expect more political strife, more disruptions and more change.

Technicals:

1. 12300 is a key level. If it closes above this level decisively, then we can expect a rally to above 13000-13300.

2.  I still expect 10000 to be tested which may be totally wrong.

A bright future awaits India and I expect the golden years to just begin. Nifty 25000 is not distant dream and i see it being achieved before the sun sets on the Modi era.

Time will tell what the future holds for India. I predict a bright future.

Sunday, July 7, 2019

Budget 2019 and its implications

Another budget came and went. This has significant implications as it is a forward looking budgets. Those looking for immediate results are likely to be disappointed.

1. The Model Rent Act is a big step forward. due to archaic laws people are hesitant to rent out homes. This will help the infra space also.

2. The hike in excise on Petrol and diesel is significant as it will help flush out black money. Even the non tax payers fill petrol and diesel so everyone pays taxes.

3. Lowering of promoter holding to 65 % will bring liquidity especially in the MNC stocks. It will lead to more participation by the retail population.

4. Borrowing in foreign currency will strengthen the rupee and keep interest rates low.

This budget is the first step in the long term roadmap towards the 5 trillion dollar economy mark. The markets will react negatively initially but over the long term it is a buying opportunity.

The time to invest in good stocks is now and they will reward investors over a 5 year period.

11300-11500 can be considered as the base for the markets. The patient investor will be the one who will be rewarded.
 

Monday, June 3, 2019

Markets in Modi 2.0

The NDA and the BJP have won a resounding victory in the Lok Sabha elections. So, let us try and explore what the market dynamics will be going forward?

1. A strong government for the next 5 years means that economic reforms will continue to be carried out.

2. In Rajya Sabha, the NDA will get a majority by the end of 2020. This will further ease the passage of various reform measures.

3. Blue chip companies will be the way forward. safe returns will come from such stocks and the market caps of Indian companies will grow multi fold.

4. In the next 5 years, expect at least 5 companies to have a market cap of Rs 10 lakh crores.

5. with the focus on Infrastructure, infrastructure related stocks will do very well.

6. For any economy to grow, banking and the finance sector will have to do very well.

7. Consumption driven themes will continue to do very well.

Keeping all this in mind and with intermittent corrections, a peak of 16000 nifty is very much possible in the next 5 years. an upside for the nifty of 33 pc and for individual stocks multi bagger returns.

Sunday, April 21, 2019

Market Analysis for April 2019 - 2

The markets closed up approx 1 pc to just below 11760. Let us look at the factors moving the markets.

1. The corporate results coming in are good. Heavyweights like Infy, TCS and HDFC Bank have posted good results. This is supporting the markets.

2. The FII flows in anticipation of Modi winning are robust. This is helping the markets move up.

3. The markets are now very close to the psychological level of 12000. Markets tend to correct from such milestones like they corrected last year from 11172.

4. Technically, on the weekly scale the RSI has scaled almost reached a reading of 70 which usually triggers some correction.

5. Right now, till May 23 I expect the markets to maintain a range of 11500-12000.

6. The monsoons have been predicted to be normal by IMD. Skymet has predicted below nrmal monsoons.

Overall a dull period for the markets, waiting for the outcome of election results. The markets seem to be factoring in all the good news. Any disappointment on the election or monsoon front will lead to correction.

Sunday, April 14, 2019

Market Analysis for April 2019 - 1

Posting after a break and if we refer my last post of September 2018, the post was pretty much correct in terms of correction. We had a good 15 pc correction.

The correction was from 11760-10004.

In today's post, I would like to focus on the post election scenario and how things can play out.

A very key indicator is the P/E ratio for the markets. Anything above 25 is perceived as a bubble territory.

The current P/E is 29.13 and the index is at 11643. This also means that with every 400 points movement in Nifty the P/E increases by 1.

Let us look at this old chart I have posted.

https://money-manthan.blogspot.com/2009/08/2-of-most-important-and-basic-analytic.html

This means we are in bubble territory already.

Now, there can be 3 scenarios post elections:

1. A Clear BJP Majority in which case there will be euphoria and we can expect the markets to go up another 1000 points or so. A top can be expected around 12500.

2. NDA win with a weakened majority. In this case, a correction can be expected. We can expect 10000-10500.

3. Unlikely but possible,opposition lead coalition. This would initially lead to a sharp correction much like in 2004. This will take us back to 9000-9500.

What is the bottomline in all this? The earnings have to catch up with the Nifty. In the best case scenario also there is limited upside and it would be prudent to book profits if not before elections but definitely post elections.


Thursday, September 6, 2018

Market Analysis for September 2018


The markets closed August at about 11680 which is a new closing high for the Nifty. August was very bullish series for the markets.
1. With this, technically, the corrective A-B-C from 11172 can be discarded with a down C leg pending. It means that the markets should continue up between 11700-12000 and then correct.

2. This corrective when it occurs will be a deeper correction. The markets over the last few years have always given a 15-20 pc correction and a buying opportunity.

3.The correction when it occurs can be from 6926—11750 odd levels . This will give good entry levels for stocks.

4.Fundamentally, rupee is hitting all time lows and domestic fuel prices are at all time highs.
The elections in MP, Chhattisgarh, Rajasthan would be held in November and in the run up to elections markets are always very nervous.

5.The uncertainty or rather the perceived uncertainty till May 2019 means no breakaway rally from here. Between last month and now, things have deteriorated rather than improved.

6.I am booking profits and taking out money. The last few rupees let someone else take the profits, I would wait to buy on dips.

Markets always give opportunities to buy and current levels, the risk reward profile is not matching.
The markets can remain higher for some more time but they will have to correct before rallying up.

Wednesday, August 1, 2018

Markets Analysis for August 2018

The markets ended the month of July at 11356 an all time high closing. Let us look at the Technical and Fundamental factors which would impact the markets in the month of August

Technicals:

As per Elliot, we could be in a irregular correction, where starting from 11172, a 3 legged correction is progress.

Wave A ended at 11172 - 9952 =  1220 points

Wave B 9952 - 11356 and ongoing, in an irregular up move it can exceed the previous top and go above it and then correct.

Wave C yet to unfold with targets of 10000 and below.

This pullback rally is not a broad based rally and thats supports the thoery it is a corrective rally.

The correction to 10000 and below would be a buying opportunity to a mega rally to about 16000 in the next 5 years.

There are several fundamentals at play out here which support my hypothesis.

Fundamentals:

1. The biggest wildcard is that we are in an election year. Anything can happen in May 2019 and markets hate uncertainty. Markets function only on two emotions fear and greed. In Jan 2018, greed took the upper hand and now it is fear which is taking hold of the markets.

2. The interest rates are rising and that is a bad sign for the equity markets. G Sec yileds near about 8 pc and likely to rise further. Spending picks up in an election year and thats fuels inflation. RBI has to keep hiking rates even at the cost of growth.

3. Global headwinds in the times of Trump and trade wars continue to persist. No one knows how big a fire a small spark can light and whether it can be controlled.

4. With rupee breaching all time highs (69) and acounting, oil imports become expensive, fiscal deficit increases and foreign funds lose out from the markets.

5. One positive is the SIP money from domestic investors. How long it will flow in is the key?

So what do we do?

Book part profits where sitting on huge gains. Accumulate only those stocks you are willing to average at lower levels.

We are as likely to see 9700 as we are to see 12000. A pre election rally seems unlikely to me.

Saturday, March 17, 2018

Probabilities for the Markets

We have seen the Nifty correcting from 11172 and there are a couple of probabilities in play.

1. A leg was 11172 to 10276
    B leg was 10276 to 10638
    C leg is ongoing

C.1 is 10631 to 10141
C.2 10141 to 10478
C.3 ongoing

2. The next possibility is all this is A leg down followed by corrective 600 700 point rally ending with a fall to 9500-9700.

In the case of 1st option, fall can end between 9900-10100.

In the case of second option, a bounce followed by new lows.

In both scenarios, it makes sense to deploy at least 50 pc cash in hand now.

Sunday, February 18, 2018

No Clarity yet in the markets

Last week, we had considered 2 possibilities in the market. Both still remain alive.

1. The down move is still not complete and a low is pending at 10000-10100 followed by 500-600 point rally.

2. A wave is complete, followed by a rally to 10700-10900 and then a final leg down to C.

Breach of 10398 means down move is not complete and breach of 10640 means we are headed to 10800-10900.

Investors can buy at 10100, sell at 10800