Sunday, August 31, 2014

Incremental Gains Continue

The truncated week saw another 0.5 % gains despite of it being expiry week. The markets continue to make steady progress. Let us examine the parameters which will influence the markets.

1. FIIs continued to be net buyer everyday of last week. They have bought cumulative 7000 crores for the month of August alone.

2. The GDP numbers which came in on Friday at 5.7 % were way beyond expectations. I expect good car sale numbers keeping in mind Ganesh Chaturthi sales.

3. Modi visit to Japan and the warmth displayed by the Japanese Prime Minister bode well for the country. Japan is Asia's second largest economy and we are the Third largest. Japan invests significant amounts as aid for development. Japan is a key Strategic economic as well as Defence ally for India.

4. India is surrounded by China and Pakistan. It needs allies who need similar support and have similar concerns. Japan, Philippines, Vietnam all become natural allies. Any conflict is always decided by the Friends a country has.

5. The Election Commission is yet to announce date for elections so expect limited action till then.

6. Technically, Nifty is very bullish considering it is closig at all time closing highs.

Unless something major negative happens, I expect small upwards movements to continue. The ext major trigger will be the Assembly Elections in the 4 key States in October and November 2014.

Sunday, August 24, 2014

Markets continue to Consolidate

The markets continued to consolidate up 1.6 pc. The markets moved up 2.5 pc for the month so far and the movement has been so quiet that no one has noticed. Let us see if anything has changed this week.

1. The FIIs continued to be net buyers for the entire week. This indicates that the flow of foreign money continues.

2. The markets closed at new monthly highs and much over the previous high of 7840 which is a very bullish sign.

3. The monsoons have stabilized and spread across the country. The poor monsoons, even though the deficit is still 19 pc seems to be receding in the past.

4. The markets have moved up but the individual stocks are still lagging behind. This could be a buying opportunity for selective stocks.

5. There seem to be no clouds on the horizons but a potential trigger could be the Assembly elections results in the 4 states Maharashtra, Jharkhand, J&K and Haryana. The results could be around the last week of November and that is the time when the markets take a decisive turn up or down.

So, now is the time to enjoy the festive seasons, buy good quality stocks on decline. 6400 is the long term support and 7450 is the immediate support.

Sunday, August 17, 2014

Weekly Gains by the Market but....

The Markets gained 2.9 pc in the last week based on hope in the budget speech. There are some disconcerting signs in the market.

1. The markets are only 50 points away from the previous all time high but many of the mid caps are 20-30 pc down from the top. This is a disconcerting sign.

2. The FIIs continue to be net buyer albeit at a smaller rate. The DIIs have out bought the FIIs by 3:1 ratio.

3. Modi speech was the correct one but unfortunately not enough to enthuse those who are looking for a quick gain from the markets. At least 1 should have the patience to hold for the next 18 months.

4. There are have been critical turn dates sometime in July and middle of November, so depending on how the markets react we can get a 10-15 pc correction from the top.

5. The structure is in place for the next Bull Run, but the Government will go slow, first wait for the Assembly Elections in Maharashtra, Haryana and Jharkhand out of the way. The dates are supposed to be announced on August 20th and the model code of conduct will be in place anytime soon.

6. From the strategic long term point of view it makes sense to focus on Assembly elections, increase the tally in Rajya Sabha and then go for the big bang reforms.

Strategy remains the same, buy on dips good quality stocks which withstand the test of time and ot look at that them everyday or even every week. Businesses do not change everyday.

Sunday, August 10, 2014

Correction: A Buying Opportunity

The markets continued the correction from the top. Week on week, the markets corrected 0.4 pc to close at 7569. The Long Term trend remains intact and this should be treated as a buying opportunity.

1. In every Bull market, corrections are normal and a correction of 10-15 pc from the top should be treated as normal and welcome.

2. The FIIs have sold about 1000 crores in August and the DIIs have bought above 1600 crores. Such phases are usually buying opportunities.

3. The monsoons have stabilized, the deviation from the Long Term Average has come down to -17 pc.

4. The markets have been driven down mostly on geopolitical tensions. As seen in last August, these are transient in nature. The bounce is sharp and does not give too much of a buying opportunity.

5. The Auto Sales have been robust now for the month of July. Auto Sales are early indicators of heightened economy activity and a change in sentiment.

6. The Economic cycles are always based on sentiment. The minute people start feeling confident and good about themselves, they start going out and buying. Buying leads to orders being placed and the cycle goes on. The trigger for the chage in sentiment was the election of the Modi Government.

7. Key elections in states of Maharashtra, Haryana, J&K are the next trigger. while the BJP is expected to do well in Maharashtra and Haryana, the proof of the pudding is in the results. An opinion poll gave the BJP-Shiv Sena combo a 2/3rd majority in Maharashtra. The results are key so that the BJP boosts its numbers in the Rajya Sabha and is not that dependent on regional parties to pass key bills.

The coming days and weeks will give good buying opportunities and one should stick to good highly robust stocks with strong and managements with integrity.

Sunday, August 3, 2014

Feedback Time - Good, Bad and the Ugly

I have been posting for 5 years and 3 months. It has been a long a journey and the road has been long winding and highly enjoyable.

I have been in the markets for 16 years now, helped run an investing Sunday club where we used to meet on last Sundays of the month for 5 years, and been part of various online forums for 11 years now.

To quote Robert Frost:

Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.”

“These woods are lovely, dark and deep,
But I have promises to keep,
And miles to go before I sleep,
And miles to go before I sleep.” 

The journey has been highly exciting and helped me become a better Technical and Fundamental Analyst. It is time to take a pause and take a deep breath before commencing the next leg of the journey.

I need from each of you what has been Good, Bad and Ugly so that I can return as a better analyst.

It is time to step back and look at the Big Picture.

Please feel free to send your feedback at nish.stockid@gmail.com

Tuesday, July 29, 2014

Nifty Long Term Elliot Wave Counts

Today on a holiday, let us step back and look at the Long Term Elliot Wave picture. In the day to day and weekly hustle bustle, the big picture is often lost and it is only the big picture which counts and nothing else.

I tried to count the wave structure from the bottom made in October 2008 and re-tested in March 2009.

This post is dedicated to Ralph Elliot, the father of Elliot Waves (Born 28th July 1871)
http://en.wikipedia.org/wiki/Ralph_Nelson_Elliott

 



Wave 1 was from 2253 to 6338 constituting 4085 points and lasting from October 2008 to November 2010. It tested the previous top at 6358.

Wave 2 was down from 6338 to 4531 constituting 1807 points, about 44 pc of the previous rise. It lasted from November 2010 to December 2011.

Wave 3 started in December 2011 at 4531
Wave 3.1 UP 4531 - 6229 in May 2013 (1698 points)
Wave 3.2 DOWN 6229- 5118 in August 2013 (711 points - 42 pc retracement)
Wave 3.3.1 UP 5118 - 6415 in December 2013 (1297 points)
Wave 3.3.2 DOWN 6415 - 5933 in February 2014 (482 points - 37 pc retracement)
Wave 3.3.3 commenced in February 2014 and has targets of 7631, 8680 or 10378

Wave 3 has traversed about  1908 points from 5933. depending on where it ends, the broader targets for Nifty could be around 10400-12000 points.

Overall, the top should be made sometime around November 2015 - Feb 2016 period as per the famous 8 year cycle, where every 8 years a serious top is made.

The negation point for all this break of 6350, the previous multi year top.

Strategy for me is simple:
I have just bought and held the 10 stocks I shared with my friends as my core portfolio on June 30th.
I will take a call on liquidating them in November 2015, in the intermediate book profits and keep reducing cost of acquisition.

Elliot is not the holy grail of investing and should be used just as 1 of the aids for looking at the big picture.

Sunday, July 27, 2014

Expiry week looms large

The markets gained 1.7 pc during the week to close at 7791. Next week is expiry and a truncated trading week to boot with a holiday on Tuesday.

1. The FII buying continues but with a slightly reduced buying intensity.

2. The monsoon has well and truly set in over the country and it may just be a case of delayed monsoon cycle where the entire cycle is pushed forward by 1 month.

3. The markets for this week have expiry and only 3 days to expiry. The markets would be bullishness above7841 and a range of +- 200 points can be expected over this week.

4. The fundamentals seem to be improving with sentiment sky rocketing.

5. Only warning sign for the BJP is the Uttarakhand by election results where the Congress swept all 3 seats including 1 seat held by the BJP for 20 years. This brings them closer to 35 seats and the Congress Government in Uttarakhand becomes safer. The longer term implications are that the BJP needs to be careful especially with elections in key states like J&K, Haryana, Maharashtra looming large in next 3 months.

6. Winning in these key States is essential so that the Rajya Sabha strength of the BJP increases.

How Modi handles the next 4 months will define his first term in office. Interesting times ahead.

Stay tuned for a special update on Nifty Long term Elliot Wave Charts on Tuesday morning.

Sunday, July 20, 2014

Cues Turn Positive

The markets have digested the budget and had a rally of 2.7 pc. The Q1 results are in the process of being declared.Let us look at the key factors influencing the markets.

1. The monsoon worries have abated and it is raining in most part of the country. The deficit has gone down to -15 pc from -43 pc. We may have a deficient monsoon but definitely not a severe drought as feared.

2. The FIIs were net buyers to a tune of 2000 crores last week thus being the major drivers for the markets.

3. The IIP numbers have improved. There is a change in sentiment in the markets. The mood of the people is upbeat. Often, it is the change in sentiment which drives economic activity. If people feel optimistic about the future then they spend money and consumption drives growth. It is a cycle and we may just have hit the bottom in terms of sentiment in early 2014 and moving up.

4. Auto sales for the month of June were good. These are early indicators of economic activity picking up and trends for the next few months needs to be monitored.

5. Globally, the Iraqi situation has stabilized and Brent crude prices are down. The Government is losing just Rs 2.5 over diesel and if this trend continues by the end of the year, the subsidy on Diesel should end. Diesel and Petrol being subsidy free, who would have thought about 4 years ago, when Petrol was made free from the subsidy regime in June 2010.

6. The Nifty is at a critical level between 7650-700 and a close above these levels would indicate further upsides.

7. Projected targets could be range from 8100 to 8400 levels.

8. The Results of companies have been fairly good. Reliance beat expectations yesterday and so did TCS.

Time to stay invested and reap the benefits of long term investing.

Sunday, July 13, 2014

Events out of the way. What next?

The last week was an action packed week with the Rail Budget, Economic Survey, Union Budget and Infosys results. The markets sold off on each event day thus fulfilling the adage “Buy on Rumors, Sell on News”. What has really changed in the past 1 week?
1. The Rail Budget met expectations. Most Rail Budgets announce lots of new Trains and there is no mention of how the funds are going to come in. 94 paisa out of every 1 rupee earned by the Railways goes in routine expenses like wage bills, maintenance. Nothing is left for the spend on Infrastructure. It makes sense to have fewer announcements and finish off existing projects.
2. The Union Budget was made within 45 days of coming to power. That is too short a time for any Government to make a meaningful impact.
The next budget is 7 months away and that is the real budget. The Budget announcement was a statement of intent and clarity on Retrospective tax, focus on infra spending are all positives.
The commitment to meet the fiscal targets and no major commitments being made on spending is heartening. The tax sops will improve sentiment amongst the middle class and the expansion of PPF limit to 1.5 Lakhs is most heartening. PPF is the most important form of saving for small investors like me and i would have welcomed if it had been raised to 2 lakhs also.
3. The Infosys results were average. The main show is yet to begin. The Attrition is good because the deadweight is being let go and time for a new Infosys to be built. Its price to earnings multiple is low compared to TCS and I expect Infosys to outperform its peers in terms of stock Price performance.
4. The Budget has come and gone and the monsoons have started to pick up at least in Mumbai. The negatives are getting out of the way and the time is to use every dip to buy good quality stocks.
I firmly believe such opportunities come once in a lifetime and we are sitting on the cusp of 1 such. I do not mind 500 -1000 points correction on the nifty as that gives us a chance to buy good quality stocks cheap.

Sunday, July 6, 2014

Pre-Budget Rally commences

The markets gained 3.2 pc for the week and closed above the previous highs to close at a lifetime high. The pre-budget rally has well and truly begun and the time to part book profits is very well near.

1. The markets have begun to run up and they need to take a pause somewhere before the next serious up move. Budget day becomes very critical as I dont see any correction before the budget now. The Rail Budget on Tuesday will be a pointer to the Union Budget.

2. The Union Budget will be high on reform announcements and could lead to an upward burst. Overall we are now in a secular bull market which i see continuing at least for the next 14-16 months. The 8 year cycle points to a top around early 2016 late 2015.

3. The FIIs in the last week have bought about 60 pc of what they had bought totally in the month of June.

4. The Iraqi crisis seems to be easing a bit. 1 co-relation is that a bull run in equities coincides with a bull run in Oil.

5. The monsoons have arrived in Mumbai, there would be poor monsoons but the impact remains to be seen. The handling of the Iraqi crisis has already earned the Modi Government credit and good will in Kerala and the rest of the country.

6. I expect some big bang announcements in the budget signalling the intent of the Government. Budget is meant to signal the intent and the implementation would be next 16-18 months.

7. This rally has legs to go and targets of 12000-15000 Nifty do not seem unrealistic. in fact, I see similarities between June 2006 and now when the markets almost doubled. In June 2006, the Nifty was 3128 and peaked at 6357 in early Jan 2008.

Now, is the time to build a portfolio of good stocks and remain invested. Use short term peaks  to book profits as we do not know when the eventual top will come.