Sunday, May 1, 2016

ICICI Bank Results show the Risks of NPAs

The week was flattish for the markets as the markets continue to stall around the 8000 levels. ICICI Bank declared its results after market hours on Friday and which were disappointing to say the least.

1. ICICI Bank increased provisioning for NPAs and this led to a decline of 76 % in its profits. The executives of the Bank will also forgo bonuses for the year. Steel, power and cement sectors could have more NPAs.

2. The ICICI Bank results underline the fact that the Indian economy is not out of the woods and the financial sector could face more stress.

3. Bank of Japan refused to extend Fresh Stimulus to the markets and that will lead to less hot money pumping up emerging markets like India.

4. The FIIs were net buyers of only about 3000 crores compared to 24000 crores in the month of March 2016.

5. It will take some very strong news to take the markets above 8000. The Parliament is in session only the next week and GST bill does not seem to be on the agenda.

6. Technically, 7950-8000 remain very strong resistances and supports are at 7400-7500 followed by 7250.

7. There are some very good IPOs in the market with Parag Foods coming in the first week of May.

8. The Election Results in May could provide some direction to the markets. The similarities are eerie. In May 2004, 2006, the markets corrected in May on the back of election results and there was no correction in the month of March like this year.

Sunday, April 24, 2016

Good results from Infosys and Reliance

The full year result are off to a good start with two bell weathers announcing very good results. The market has now reached a very solid resistance zone and will need some very good piece of news for further rise.

1. The Results season has started off in full swing and the results are very good till now. Results season and Parliament in session means the market moves are in a very narrow band.

2. The FIIs continue to buy but their volume of buying has dramatically reduced. Till date in April they have bought 2000 crores worth of stock whereas they bought 26000 crores in entire March.

3. The Global cues are neutral at the moment. The next big triggers are still some time away. THe UK vote whether to stay in the EU is in June, election results for the assembly elections are still 1 month away and the progress of the monsoons still 45 days away.

4. The Parliament is in session the next week onward and expect the Opposition to block the proceedings over the dismissal of the Uttarakhand Government.

5. Technically 7950-8000 are strong resistances. Logically, the markets should correct to the 7250-7500 band before making attempts for further up moves.

All in all, a dull time for the markets. It is a good thing to book profits for those who bought stocks at lower levels.

Markets always give a chance to buy stocks.

Sunday, April 17, 2016

Fixed Income Options in Falling Interest Rate Regime

Let us take a break from the normal markets this time and look at the various fixed income options available especially for the Senior Citizens. A friend of mine had this query and I realized this might be something many of us might be looking at.

1. Bank Fixed Deposits - The Rates have crashed and this becomes the most un viable option of all. The benefit of Bank Deposits is that easy liquidity is available.

2. NCDs - Many non convertible debentures are listed on the NSE and are can be bought through Open Markets. Some like L and T pay about 10.24 % twice a year. There are other NCDs also listed of less reputed players.

3. Tax Free Bonds - One should always apply for every issue and once we get proportionate allotment keep accumulating these tax free bonds. No Income Tax needs to be paid on these bonds' interest every year.

4. Debt Funds - A clear idea of good debt and income funds can be had on I can spot many funds which have consistently given returns of 8 to 10 pc per annum. Now, the catch with such funds is that one needs to hold them for 3 years to qualify as Long Term holdings. Also there is a Dividend Distribution Tax to pay. This the MF will pay on your behalf.

Now, if you go for the growth option and liquidate the gains, Short Term Capital Gain will be as per your income tax slab. This option is good for Senior Citizens who are not paying much income tax.

5. In case one is a Senior Citizen, then there is a Government of India Scheme with assured 8.6 % interest per year.

So these are the options available. The next 2 years are going to be very tough for fixed income folks and one must look at all possible options to squeeze out the last penny from our investments.

Sunday, April 10, 2016

Sell on News Event materializes

The RBI Policy has come and gone. It announced a 25 basis point reduction and not the 50 basis points which the markets was expecting. April is a month of corporate results and I expect  the markets to be flat with a negative bias.

1. The entire rise from 6825 to 7777 can be corrected. The targets for this correction can be 7413, 7301, 7188 or 7050. This would be the dip which presents a very good buying opportunity.

2. The RBI will not cut rates further till it gets to see the progress of the Monsoon. The GST Bill also is not likely to get passed very soon.

3. The FIIs have become marginal net sellers for the month of April so far. Any up move is largely dependent on FII inflows.

4. Stock moves have become very sector specific. In the last 2 weeks, the Pharma stocks were heavily battered. Front line Pharma stocks are always a very good bet. The USFDA observations are always closed.

5. Globally, the markets do not have any positive clues.

6. The next 2 weeks are truncated weeks with 3 trading holidays on April 13, 14 and 19. This will lead to very subdued movement in the markets.

7. The Corporate earnings are expected to set the tone for the markets which will start coming in from the next month.

8. There are 2 ways at looking at this rally. 1 is that the correction ended at 6825 and this is a fresh impulse under way. Second is that this is just a corrective up move and 1 more leg down is pending to new lows.
Whichever way one looks at it, 7250-7400 seems to be on the cards and which would be a very good buying opportunity.

Sunday, April 3, 2016

RBI Policy to dictate the next course of Action

The RBI policy is on April 5th and expectations are being built in of a 50 basis points cut. The rally so far from Budget day has been on expectations of a Rate Cut. The RBI policy could well turn out to be a Sell on News event.

1. The FII continue to buy. They bought about 24000 crores worth of shares in March and that is one of the key reasons the markets have rallied so far.

2. The Government commitment to meet the fiscal deficit target as well as the Rate in Small Saving Schemes has led  to expectations of a higher rate cut. Governor Rajan normally holds his cards close to his chest so one never knows.

3. April is the month of full year results of companies. Result months are typically flat to down months for the markets.

4. The Sell in Feb, buy in April saying which usually comes true states that same stocks are usually cheaper in April than they were in Feb. The same may not hold true this time as the markets were down in Feb and up in March. The adage can be modified to get the stocks cheaper than their peak prices in March.

5. For the last 5-6 years, April has been mildly negative to a flat closing month. Let us see what this month brings in.

6. Technically, we are heading into a resistance zone from 7800 to 8000. Supports remain at 7600, 7450 and 7250. The markets may go down towards 7200 but not below that.

7. The Pharma stocks have been beaten down on USFDA warnings and as such present a good buying opportunity.

It is time to be cautious, book a little profit and wait for dips to add more.

Sunday, March 27, 2016

Year End NAV dressing will keep the market afloat

The Hope of a Rate Cut rally continues and the markets gained a further 1.5 % in the truncated week. The year NAV dressing time is here and the bonuses of the Fund Managers are dependent on the NAV values so expect the markets to remain afloat at least in the first half of the week.

1. The key ingredient of a rally is the FII inflow and till date in March the inflow has been 16500 crores. This has been the highest since March 2014 when it was 25000 crores. As long as the money is pouring the markets will rise.

2. The RBI policy on the 5th of April is a key trigger. A 25 basis rate cut has been factored in. It could also happen that it is a sell on news kind of event. The markets have run up almost a 1000 points and some kind of correction is due.

3. The Result season is in April and as we have noticed in the past the Results season usually the markets are flat to negative.

4. Technically speaking we have resistances coming in from the 200 EMA at 7778 and at 200 DMA at 7900. The layer between 200 EMA and 200 DMA becomes a critical zone. This zone is tested before a breakout or a breakdown.

5. The Global cues are quiet at the moment. So everything depends on the RBI Action in the first week of April.

This is a good time to book profits for stocks bought at a lower level and wait for a dip to buy again.

Sunday, March 20, 2016

Nifty in Resistance Zone

The markets continued their upward march after the Budget to close up 1.3 pc. The FIIs have continued to support the markets in the month of March. I feel the post budget rally may be coming to an end and we should soon see a correction of about at least 400 points which should be a buying opportunity.

1. The FIIs have bought big in March almost 12000 crores worth of stocks. This is the highest in the last 2 years.

2. The Markets have retraced the last falling leg from 7600 to 6825 in faster time. This means it has made up the lossses from top to bottom in faster time. This is a bullish sign.

3. The markets may have made its bottom at 6825. What does this now mean for the markets now? It means now that every dip is a buying opportunity. The markets should generally correct about 50 % of the rise before continuing its up move. This is a thumb rule and need not be followed. If we go by this logic then, this means we can touch 7219 once again. 7240 is also a very crucial support for the markets.

4. For a change. I looked at the Technical Indicators like RSI and Stochastic. As the image shows they are at a point where the market usually makes some kind of a top.

5. There is no major news to take the markets up now. The next major trigger is the RBI policy on April 5th.

6. The coming week is a truncated week with the markets being closed on Thursday and Friday. This can lead  to profit booking in the markets.

7. Globally, also for the month of March all triggers seem to be over. There is a saying stocks are always cheaper in April. So, if we continue this rise for 2-3 sessions more and then there is a correction, then the saying will be correct this year also.

Sunday, March 13, 2016

FII Buying Continues

The FIIs bought for all the trading sessions in March so far and the index sustained its post budget rise. Let us see what can influence the markets going forward.

1. Every correction in the markets has lasted 12-14 months so far. By correction, I mean the time taken to reach a low point from the top. In this case 9119 was the top. In all probability, 6825 might have been the bottom. It is always said that the markets visits a bottom once. In this case, 6869 and 6825 are very close by.

2. The first up move from 6825 has lasted about 800 + points and may be nearing completion. We may have a 300 400 points correction which would be a buying opportunity. The support zones comes to around 7240.

3. The Advance Tax numbers will be out next week and will be a good indicator on how the companies have fared.

4. The next major event in the Markets is the Annual Results but that is still some distance far off in April. The FOMC meet next week could be 1 trigger for the markets.

5. Technically, we are in the Resistance Zone of 7500-7600, break of which can lead us to 7900-8000 region.

6. This could well be the last opportunity to capitalize on the lower stock prices.

7. The expectations of RBI rate cut in the first week of April is what is keeping the markets up.

As of now, it looks like the bottom is made for the time being and every dip is a buying opportunity.

Sunday, March 6, 2016

FIIs buy in Huge Quantities

Finally, after selling for the past few months, the FIIs have bought big in March and the markets have rebounded. Let us see if this rally has the legs to go higher.

1. The Budget was nothing great, the key take away from the budget was sticking to the fiscal deficit target. Many had expected that to infuse growth, the Government would do more spending and as a result of which relax the fiscal deficit target.

2. The FIIs have given a thumbs up to the budget and pumped in almost 6000 crores into the markets in the 4 trading sessions of March. The results were evident and the markets have risen correspondingly almost 10 pc from the intra day bottom of the Budget day.

3. The burning question is what next for the markets. The markets have risen up to the critical resistance levels of 7500-7600. From these levels, the markets can retrace this rise by say 300-400 points to 7100-7200 before continuing the up move.

4. The markets once they clear 7500-7600 will face the next set of resistances at 7900-8000 levels.

5. Only above 7751 we can say that the down move is complete and we are in a fresh up move.

6. So what do we do next? Buy when the markets cools down a bit to 7200-7300. From here the market can make 1 more low or continue higher up.

7. If the bottom is in place, then in the next 18 months, the market should make new highs in the 10500 region.

Most bear markets do not last more than 12 to 14 months. We are almost 1 year since we made a previous top of 9119 and the journey back up should recommence. By bear markets not lasting more than 14 months, I mean the time taken to make a bottom after hitting a top is generally not more than 14 months.

Sunday, February 28, 2016

DownTrend Continues

Unless the Union Budget pulls off something which is groundbreaking, I can see the down trend continuing. The DIIs have started selling now and there seems to be no respite to the markets.

1. The latest casualty of the global downtrend is the valuations of the Startups and Flipkarts of the world taking a hit. Morgan Stanley has written down the valuation of Flipkart by 27 pc.

2. The DIIs too have started to sell big. This is a matter of concern. For the month of Feb, with just 1 trading day left  FII have sold 5700 crores and DII have sold 6800 crores.

3. Technically, Feb is supposed to be a flat month but this has been proved wrong this time. Unless there is a big rally on Monday, the market is down 7.1 pc for the month and 11.5 % for the year so far.

4. If the previous lows are broken then the next supports come in around 6450-6550.

5. 1 thing is clear, the time frame for getting return on Investment has got enlarged. 1 would have to wait at least 18 months for stocks bought in the current downtrend.

6. There seems to be no sign of the passage of the GST bill in the Parliament. 1 major trigger for the markets to rally is missing.

7. Unless the FII flow gets back to normal, this down turn will continue. Every rally will be sold off into.

8. I can see this Government losing focus of the issues at end getting side tracked. Unless Modi concentrates on reforms, I see it getting increasingly difficult he being re-elected again.

All in all it is a tough time all around. The Fixed Deposits are not earning more than 7.5 % rate of interest, Real Estate is sluggish and the stock markets are down.