Sunday, May 24, 2015

Expiry Week Ahead

The markets zoomed 2.4 pc last week and is now nearing  the cluster of resistances. The expiry of the May series is also this week. Let us see what the markets have in store for us.

1. The expected resistances are in the 8500-8600 region and we are almost there. From here, there are 2 probabilities, 1 is we move down to test 7700-7800 or we move straight ahead to test the old resistance of 8800.

2. The next trigger for the markets are the RBI rate cut likelihood on June 2nd and the onset of monsoons. The 2 key events are lined up in early June. Hence, this being expiry week, I expect the markets to be subdued and trade within a range.

3. The FIIs have again begun to buy after the dust up over MAT has settled down. DIIs are also supporting the markets. This has lead to the increase in the Nifty over the past week as the selling pressure has ebbed.

4. Trend line resistance comes to between 8580-8600 for the week. Support comes at 8331.

5. The RBI policy has expectations of a rate cut being built in. If there is no rate cut then that could be a trigger for correction to take place. The RBI may wait to see how the monsoon progresses and then cut rates some time later in June.

6. The Life Insurance and Accident Insurance Schemes launched by Narendra Modi have been a big hit with almost 7.6 crores people opting for it. Such schemes were badly required at nominal rates.

It is now time to be a bit cautious, start booking part profits if bought at lower levels. If this is just a corrective up move then it may mature this week and we hit some kind of interim top. If that is the case then we will continue making lower highs and lower lows. 9119, then 8845 and so on.

Sunday, May 17, 2015

A breakout imminent

The markets have been moving in a small range for the past few weeks and a move of 300-400 points is imminent on either side of the breakout. Let us try and examine how the markets can move.

1. The Parliament has ended and the GST bill is still to be passed in the Rajya Sabha.

2. 1 year of Modi Sarkar is nearly done and even though a lot has been done, the sky high expectations have not been met. More on 1 year of Modi Sarkar in a separate piece as it merits an entire separate piece in itself.

3. The exports have fallen for the 5th month in succession underlining weak global demand.

4. The Fuel prices have been hiked and are now only 6-7 rupees below the peak prices. The excise hikes of 7-9 rupees no one is talking about a rollback. The oil prices were supposed to bounce till 70 USD per barrel and are almost there at 66 USD a barrel. Anyfruther rise beyond 70 USD and then the Government strategy needs to be seen.

5. The monsoons are round the corner and the next moves will be dictated by the Monsoon. Till then the Markets would continue to do time pass with mini moves up and down. A clear trend would emerge only after the onset of monsoon.

6. Inflation is under control and the Factory output is flagging The RBI can cut rates on June 2nd or wait for clear indications from the monsoon to cut rates. RBI has demonstrated that they do not necessarily cut rates only during policy meetings the last 2 times.

7.. The markets if they break 8300-8350 can move up move up to 8600 levels and conversely if they break 8100-8150 can move down to next support of 7800-7850.

This would be the broad range till we have the confirmation about monsoons. A poor monsoon would take us as low as 7500. These are important levels as they are the levels hit when Modi won the elections.

The next few weeks would be the lull before the storm and a clear trend would only emerge by the middle of June by when it would also be clear whether we have a poor or good monsoon.

Sunday, May 10, 2015

Will GST be passed in the Rajya Sabha?

The markets ended flat last week but that was only half the story. The first half saw a decline and the end of the week saw the pullback as expected.

1. The Parliament session ends in 3 days and the GST bill is expected to be voted upon in the Rajya Sabha. It has aready been passed in the Lok Sabha. If the Government manages to push it thorugh then it would be a very big sentiment changer and then expect a relief rally to 8500-8600 in the next week itself.

2. The FIIs coninue to sell. The latest reason being given is a slew of IPOs in China and money being diverted there.

3. Globally, the things go into a quiet period of time right now. Once the Parliament closes on Wednesday, there would no major immediate triggers for the marets to fall or rally.

4. The next major trigger would be the monsoons in early June.

5. The bond yields have gone back to almost 8 pc from 7.66 pc. If it goes higher to say 8.2-8.3 pc then one can again look at buying Gilt funds.

6. The corporate results have come and gone. They do not show much promise yet.

7. The Auto car saes showed a decent spike in the month of April. Auto sales are usually an early indicator to show that the economy is picking up.

In a nutshell, we may have made a short term bottom at 7997 and can expect markets to trade with a positive bias in the near term, especially if the GST Bill goes through.

Wednesday, May 6, 2015

Image speaks a thousand words

The attached image speaks a thousand words. Very rarely since 2008, the markets have declined for 3 consecutive months. And even when they have declined the fall in the third month has been very marginal. we cannot catch the exact top or bottom and now may be a good time to buy.

Sunday, May 3, 2015

2 months of decline -Time to Buy?

The markets have declined straight for 2 months now. We have corrected about 10 pc from the top in the Nifty and in many individual stocks even more than that to about 20-25 %. Is it now a time to buy?

1. The attached image speaks a thousand words. Very rarely since 2008, the markets have declined for 3 consecutive months. And even when they have declined the fall in the third month has been very marginal. we cannot catch the exact top or bottom and now may be a good time to buy.

2. The 7950-8050 zone is a cluster of support zone in technical parlance. If we breach this we are staring at 7500.

3. The FIIs were net sellers for the last few days and that contributed to the lack of support for the markets.

4. The US fed maintained status quo on rate hikes. This means the party will continue for sometime more.

5. The fuel prices were hiked over the weekend and all the excise rate hikes, there is no talk of rollback. The rate at which this Government is progressing, the political climate may soon turn to be hostile for reforms. It is the next 1 year or never for rolling out reforms.

6. The markets may rally from here, but it may only be a relief rally of 500-600 points. The market is becoming a scalper's markets unlike from August 2013 to Feb 2015, a period of 18 months in which it only went up straight in 1 direction.

A good way to play this kind of market is part book profits and lower the cost of acquisition. In this way, you do not lose if the markets fall nor miss out if it rises further.

Example: If you buy a share A worth about Rs 100. It moves to Rs 110 and you sell half the quantity. Your cost price for the remaining shares becomes 90. Now, if the markets fall, then your revised cost price is less than at the price at which you bought. So you can absorb 4-5 % fall in market terms and still have same price. Which means if you bought at 8181 and markets went up to 8500 and then fall. Your revised cost price would be equivalent to levels bought at 7950-8000.

Sunday, April 26, 2015

Time to buy Quality Stocks

It was another down week for the markets and the markets were down by 3.5 %. The markets have come down to attractive levels and it is time to buy.

1. The FIIs have been net sellers entire month and though they show a buy  figure of 16000 crores for the month, the entire thing comes on 21st April when the Sun Pharma stock was sold by Daichi.

2. Even though the markets have corrected by about 10 pc, most of the blue chip stocks have gone down by 20-25 pc.

3. If we consider this as a 3 legged down move then,

A was 9119 - 8269 = 850
B was 8269 - 8845 = 576
C is 8845 - 8273 and ongoing = 572

targets could be 7945 or 7745.

In either case, the time to buy has come. One cannot time the markets to catch the exact top or exact bottom.

4. The Global things seem to be stable. Greece issues come and go periodically.

5. Crude has stabilized around 60-65 USD. Any further spike would put pressure on the markets.

The current fall again highlights the importance of timely profit booking. Stocks which could have been sold in early March are now available at 25 % discount.

Sunday, April 19, 2015

Markets trapped in a range

The markets had a down week in the truncated week to again close at the lows of the week. The corporate results have started trickling in and they are pretty lukewarm to say the least.

1. RIL beat expectations and had their all time high record profits. The Retail arm posted profit for the full year. The real story in RIL woud be over the next 5 years when they de merge the Retail and Telecom business again as they had done in 2005.

2. TCS gave a big bonus to its staff on the 10th year anniversary of its listing. Ths also points out to increased attrition being faced by TCS and its move to retain staff.

3. The markets are trapped in a range between 8300-8800. Till the range is broken decisively we will not see moves either to 7800 or to new highs are 9300-9400.

4. The VRL IPO was oversubscribed and it is going to be a lottery for Retail investors those who get allotment.

5. The future move of the market will be guided by the Results season.

6. Probable path for the Nifty could be 1 more up move from here to about 8800-8900 before a dip to 8000 or a straight dip from here.

7. In the last couple of days, the FIIs have begun selling.

The bottomline is clear. The next 18 months at least are very bullish for the markets. It is a buy on dips market.

Sunday, April 12, 2015

Mid caps start outperforming

The markets have gone up another 2.3 pc and we are at a critical juncture now. Let us see if fresh highs are in the vicinity or 1 more correction is due.

1. The week had postive overtones for the Government with the overwhelming success of the REC OFS. The only grouse I have with this methodology is that they complicate it so much that it is beyond the reach of most Retail investors.

2. The bids on NSE and BSE were separate. Usually in an IPO one gets a cumulative bid list on either sites. Second is multiple price methodology adds to the complexity. If one bids too  high, then one gets allotted at a very high price irrespective of what the cut off price. If one bids very low, then the bid has to be tracked the whole day.

3. The mid caps are outperforming, while the index is slowly rising, this is the sign of a good bull market.

4. The signing of Rafale jet deal shows that the Government is intent on some action.

5. The Outlook upgrade by Moody's also helps in improving the investor sentiment.

6. The first set of corporate results will be out next week and they will set the tone for the markets.

7. 8949 is the ceiling for the current up move. If we breach that then we are headed for new highs. 8894 is another critical level to be conquered. 1 may fall from any of these levels to make another bottom between 7900-8200 region.

The strategy remains to buy on dips, good quality stocks.

In response to a reader query, I would not recommend Option Trading as a strategy but one can write higher level call options like 9200 call.

Sunday, April 5, 2015

Range Bound Market Ahead

The markets gained 2.9 pc in the 3 day truncated week. We are in the midst of a corrective bounce up. Let us see what April brings for the markets.

1. The events of March with Advance Tax payments, booking of short term losses are all behind us. The new financial year begins and lets see what can be immediate triggers.

2. The Corporate earnings are still at least 1 week away. They can provide direction to specific stocks.

3. The Parliament session recommences on April 20th and till then I expect the markets to move in a range of 8400-8800.

4. If we take this down move to be corrective in nature, then it should have 3 waves, 2 down and 1 up.

A - 9119 - 8267
B - 8267 - 8592 (already done), 8694 or 8795.
C - from the above top to 8000- 8200 levels.

Much of April should be spent in this journey within the range.

5. The Global markets also have no major triggers to speak of.

For astute traders, they could book profits at 8600-8800 and make fresh re entry at lower levels.

There is a lack of news flow in the coming weeks either to take the markets up or down.

Sunday, March 29, 2015

Time to Buy

The markets continued with their correction and further fell another 2.7 pc this week. The next week is a truncated week for the markets and now the markets have begun to present a good long term buying opportunity for investors.

1. The year end considerations are almost at an end. The next week has the markets open only for the first 3 days. It is a good time to start buying good quality stocks.

2. The markets fell on Yemen air strikes and oil prices going up. I have noticed whenver markets fall on Global worries, they tend to bounce back equally fast.

3. Even though, the markets have corrected about 9.32 pc from the top, many blue chips have corrected about 15-20 pc from the top. In a long term bull markets such drop represent good buying opportunities.

4. 8110-8170 are strong support regions and we are not too far away from that. It is a risk of 150-200 points further downside. the 200 day moving averages reside there and I have seen many times markets bounce from there.

5. The FIIs have continued to buy and that is one key reason to continue buying in this market.

6. Parliament has gone in for a recess and the first set of corporate results will trickle in only by 10-12 April.

There are no immediate triggers for the markets to go anywhere. The truncated week may lead to further correction, but then that is a very good buying opportunity. In bull markets whenever markets correct 10-15 pc it always give a good buying opportunity.