Sunday, November 23, 2014

Surge before some correction

The markets continued with their moves higher and have moved into the resistance zone of 8450-8650. Even though the markets are moving higher, the Advance Decline ratio on many days is not very favorable. Let us see what moves the markets could make.

1. The markets are awaiting a RBI rate cut on December 2nd. If no rate cut then a correction could set in. If a rate cut happens then the markets would surge even further.

2. The Winter session of the Parliament begins on Monday and all eyes would be on what kind of bills the Government is able to pass through.

3. The FIIs were net sellers on Friday.The first time they have sold in the month of November.

4. The 10 year Gilt yields have come down to 8.17 %. In the next few months they are expected to come down to 7.75 %. A short term gain can be made by investing in Gilt funds.

5. With the rate cut announced by China and stimulus by ECB, global liquidity will remain good.

6. 8450-8650 are strong resistance zones for the markets. Looking at the rise from 7724, a target comes to around 8640.

Now, is the time to book profits for stocks bought earlier, lower the cost price and be ready to buy them back again at lower levels.

Sunday, November 16, 2014

Markets Continue Making new Highs

The markets continued making new highs on the back of FII inflows, weak oil prices and low inflation. The markets look set for for 8450-8650 range in the coming weeks. Let us look at the developments of the last week.

1. The oil prices corrected further last week and the Government instead of reducing the prices very smartly increased the excise duty on petrol and diesel. What this will do is increase revenue by 6000 crores in the remaining months of this fiscal year. Also, tomorrow when the oil prices rise, the Government can shield the Indian public by rolling back the excise hike instead of increasing the prices.

2. The FII flows have continued unabated. the first 2 weeks of November have led to an inflow of about 7500 crores. As long as the money flows in, the markets will continue to rise.

3. The next major trigger for the markets will be the Winter session of the Parliament which begins from November 24th. The passage of key bills will set the tone for the markets.

4. The RBI policy is in early December and it remains to be seen if the RBI will cut interest rates.

5. Gilt funds have shown a smart rally and returned about 10-12 pc in the past 6 months.

6. Profit booking can be done at slightly higher levels. If the markets rise by another say 200 points on the Nifty this week, I would suggest partial booking of profits.

Everything looks hunky dory at the moment ad it is safe to book profits in the markets. remember the markets have risen from 7724, a rise of 691 points ad a breather may be round the corner.

Sunday, November 9, 2014

Markets consolidate their gains

It was a truncated trading week with the markets open only for 3 trading sessions. The markets closed flat for the week but many stocks hit their all time highs. Let us explore what can happen next.

1. The Modi Government Cabinet expansion is a significant milestone. It inducts many new dynamic faces like Manohar Parrikar and lessens the workload on existing Ministers.

2. The Winter session commences on November 24th and all eyes will be on how the Government clears the pending legislation. This can influence the way the markets move.

3. With the Bank of Japan announcing stimulus, the easy liquidity continues. This will ensure the FII flows and the data for November has been positive so far from the FII inflows.

4. The crude oil prices continue to remain low thus helping the fiscal deficit.

5. The markets have given a technical breakout and the targets could be between 8450 - 8600. There could be a 10 pc decline either before the budget or after the budget.

6. At 8300+  levels, it does not make sense to create fresh positions but rather book partial profits so that the same funds could be re-invested at lower levels.

7. The Gilt 10 year yield has dropped to 8.21 pc. it could drop further depending on RBI action.

A 10 pc correction could be expected after we rally about 200 points higher. That dip would be a buying opportunity.
 

Sunday, November 2, 2014

Breakout by the Markets

The Markets closed much above their all time highs on a weekly basis on back of stimulus by the Bank of Japan. The markets have given a breakout and should continue their momentum upwards for some time. the markets have a lot going in their favour at the moment.

1. The Diesel price cut brings diesel down by Rs 6.3 in past 10 days in Mumbai. That is almost a 10 pc cut and this will cool inflation down. This can result in a rate cut and Gilt funds are making merry with Interest Rates declining. Gilt funds make money when interest rates fall.

2. The Bank of Japan stimulus may lead to more money coming to India. close ties between Shinzo Abe and Narendra Modi, Softbank investments in Indian companies all point to more focus on India by the Japanese investment community.

3. The political winds blowing in favour of the BJP has already led to some bold economic decisions being taken. It looks like modi is walking the talk.

4. The FIIs bought almost Rs 3750 crores worth of shares in the last 3 trading days of October. If the  trend continues, the markets will continue to rise.

5. The Indices have moved to all time new highs and now the second line of stocks will start moving up. Minimum targets from the current levels of 8322 are 8450-8500.

6. At higher levels again part profits can be booked, remember the money taken out from the markets is money earned.

I expect the rally to continue for next 2-3 weeks at least till the Winter session of Parliament commencing on November 24th.

After that what happens in parliament will determine the course of events.

Sunday, October 26, 2014

Markets at Key Cross Roads

It was a good Diwali truncated week for the markets. The markets gained 3 pc to reach 8014. From here, we are truly at crossroads. Let us explore what can influence the markets from here.

1. The reforms continued with the Coal Ordinance being announced. Coal is a key factor in powering India's thermal power plants and most of the plants are coal based. This will help all the power plants which are stuck up due to lack of coal.

2. The Defense logjam got a boost when the Government cleared deals worth 80000 crores. The Government in the span of 1 week has made 3 clear policy decisions on key areas like Diesel and Gas Pricing, Coal Mining and Defense Procurement.

3. There could be a correction of about 1000 points either now or after the budget. Corrections are always healthy and help in removing weak hands from the markets. The markets have corrected from 8180 to 7724 before bouncing back to 8014. Above 8100, one can be sure if  there is sustenance of 1 more move up to 8400-8500.

4. The weak crude prices go a long way in helping the Indian economy. Narendra Modi government in a way has the beginner's luck. Low crude prices is a big slice of luck and disinvestment of ONGC should be done now to raise funds.

5. The FIIs were net buyers this week and though growth is slowing down in US and Europe, India would remain the preferred buying destination.

6. 1 characteristic of this fall was that though many front line companies did not correct much, it was the stocks on the speculative side which lost out big time. This again goes to prove that it pays to stick to quality stocks.

The future of the stock markets now is in entirely hands of the Government. The Mandate has been won, Maharashtra and Haryana have been conquered, roadblocks been removed and it has been 5 months since the Modi Government has been sworn in.

All further gains would be dictated by reforms and Government action and nothing else.

Sunday, October 19, 2014

Elections over: Reforms get a boost

It was an action packed weekend with lots of announcements of reforms coming in along with the election results. The path India travels down now has irrevocably been altered and we seem to be headed down the right direction.

1. Diesel price decontrol is a major step and a move in the right direction. The subsidy was leading to a drain on exchequer and Diesel guzzling SUVs and vehicles were cornering a large part of the subsidy. diesel and Petrol are ow out of the subsidy regime.

2. LPG connection holders getting direct credit of the amount irrespective of whether holding Aadhar or not is another way of plugging leakages. Next, would be reducing the cap on cylinders from 12 to the original 9 before Congress made a populist last minute move.

3. With subsidies being reduced, fiscal deficit gets reduced. The hike in domestic gas prices further will lead to an incentive for more gas exploration efforts and lead to lesser imports.

4. The BJP comprehensive victory in Haryana where they have gone to 47 seats in the assembly of 90 seats from 4 seats in last Vidhan Sabha shows the complete domination. Congress is now left with only the major states of Karnataka and Assam.

5. In Maharashtra, the BJP has won 124 seats. If they were in a pre-poll alliance with the Shiv Sea, the Sena was offering them only 117 seats and they would have ended with maximum 70-80 seats at the upper end of the range. the calculated risk has paid off.

6. In Maharashtra, it may be the beginning of the end of the regional parties.  The base for 2019 is being prepared.

7.  The markets should rally now and from now it would be all be on performance of the Modi Government. The Honeymoon period is over, the season for excuses is over and now it is time to deliver. The petroleum reforms announced yesterday were a step in the right direction.

8. The markets could correct 100-200 points but it is time  to start accumulating quality stocks.

For the BJP, it is time to celebrate. They took calculated risks which have paid off handsomely. For others, it is time to introspect.

Sunday, October 12, 2014

Markets have started looking selectively attractive

The markets continued their correction this week and a few of the stocks have begun to look attractive. All eyes are now on the State Assembly results which will decide the course of the markets in the near future.

1. The FIIs have sold whole of October so far and their sell figures have been matched by DII buy figures. This has led to the markets not tanking.

2. The Global factors have turned weak and this is leading  to markets correcting.

3. If the BJP wins an outright majority on its own in Haryana and Maharashtra, the markets will rally else use it as a excuse to correct if the BJP is in a tight especially in Maharashtra then Modi's popularity will be questioned.

4. Brent crude has declined further leading to over=recovery in Diesel of more than 2 rupees. the fiscal Deficit definitely will be under control and this bodes well for the new government.

5. The Honeymoon period for the Modi Government is definitely nearing its end and mostly after Diwali, tough questions will begun to be asked.

6. Many of the stocks like Piramal Enterprises which had crossed 800 are now available at around 700 rupees.

7. The markets may have corrected only about 5 % but may good quality stocks have corrected much more. slowly, it is time to start nibbling at these stocks.

8. The markets can correct further till 7450 or 7600 or bounce from here. For long term investors, the buying opportunity is coming ad those willing to see their stocks temporarily go down can start thinking of accumulating.

Sunday, October 5, 2014

H1 2014 Results the next trigger

In an extremely short trading week of only 3 days, the markets barely moved. Monday also is a trading holiday. There are no short term triggers for the market either up or down. Let us see what could unfold over the next few days.

1. The next week begins with a holiday and the H1 2014 results will trickle in only after next week. I expect next week to be another listless trading week.
2. The week starting 13th October is going to be a action packed week with H1 2014 results coming in and election results on October 19th 2014. The week after that is the Diwali week and if any pre-Diwali rally if it has to start has to start very soon.
3. Globally, crude oil prices have dipped and there is actually over-recovery of almost 2 rupees for diesel. This means thanks to model code of conduct the Government cannot cut diesel prices even the previous under-recovery is being covered. This bodes well for the fiscal deficit.
4. The robust car sales point to change in sentiment. As I see it as per the 8 year cycle, we should peak out between November 2015 to February 2016.
5.Gold prices continue to make fresh lows. This indicates a lack of fear in the world markets.
6. The FIIs bought about 5000 crores worth of shares in September and the Domestic funds picked up 16000 crores worth of shares. In spite of pumping in 21000 crores in the markets, they moved up only 0.1 pc for the entire month. This indicates fatigue at higher levels ad local operators booking out.

It is time to stay on the sidelines and watch the markets. At 7945, it does not make such sense to buy as well see. If one had to sell then the last 1 month presented much better opportunities than now.

Sunday, September 28, 2014

FIIs turn Sellers

The markets closed down almost 2 pc for the week and a notable fact was that the FIIs turned sellers for almost every day of the week. Also, on Friday India received a ratings upgrade. Let us see the future course of the markets.

1. FIIs selling is a key factor. They are 1 of the most vital components that keep the markets. Typically, the Indian markets are dependent on FII money, Domestic funds out of which LIC is a key component and the Retail and the HNI component of the market.
The Domestic funds are mostly a defensive option as such they buy when FIIs sell, and markets bottoms can be identified when Domestic funds are net buyers for a couple of weeks to a month. The FIIs are the steroids on which the markets go up. the Retail and the HNIs are bit players in this whole game.

2. Now, with huge issues of divestment coming up, LIC will divert money out there and so will those FIIs betting on the long-term India story.

3. The markets are likely to consolidate in the next few weeks and months. the long-term picture remains intact. This would be a good opportunity to accumulate quality stocks rather than selling stocks at lower levels.

4. The markets closed at 7968 after testing 7841. The markets have already corrected about 4 pc from the top. It could happen that the markets test 7400 also.

5. Globally, usually the markets tend to be slow around this time of the year. It could happen that we correct now and set the stage for November to February rally.

6. The next 3 weeks also will see the Maharashtra elections happening. BJP has lost the edge in the elections and I see it extremely rare to see a BJP CM at the helm after the elections. It could still happen that there is a BJP CM but with a tie-up with NCP.

Now, is neither the time to buy or sell but to wait and watch. Buy around 7400-7500 or sell between 8200-8500.

 

Monday, September 22, 2014

Wait and Watch Continues

The markets gained 0.2 pc for the week but what was most impressive was the recovery after the Fed announcement of interest rates not rising for a considerable period of time. Let us see what has changed in the past week.

1. The options for the markets are making fresh highs and making a short term top between now and Diwali. This possibility gets confirmed on the break of previous top of 8181.
The second option is consolidating till the Haryana and Maharashtra elections results on October 19th and then correcting or making a top in euphoria.
The third one is that the top is already made and we are going to have a 10-20 pc bull market correction now.

2. The Maharashtra Alliance picture gets murkier by the day and everyone has been pushed to the brink. The last date for filing nominations is this Saturday and the picture will be clear by this weekend.

3. If everyone fights separately, it will be a free for all and post poll there could be a BJP NCP tie up as well.

4. The FII purchases have dipped during this past 1 week.

5. Gold continues to decline and should be avoided for the moment.

The best course of action right is keep part booking of profits and not to exit completely from any stock. If the markets go down add the same stocks back.
Finally, the money taken out from the markets is profits earned and not notional profits.