Sunday, July 26, 2015

Lower Crude Prices a positive trigger

The markets were down 1 pc for the week. All the commodity prices took a big beating and that is a big positive for the Indian economy. Let us see the factors for the coming week.

1. The fall in metal and crude prices augers well for the Indian economy. The massive infrastructure spend lined up will get done at much lower rates.

2. The FII s have started buying and started buying big time. This bodes well for the markets.

3. The monsoons have picked up again and with almost half the monsoons gone by, the deficit is only 5 pc. For the met forecast of a deficit of 12 pc to come true, the next half of the monsoons should be almost 20 pc below normal which is very rare.

4. Reliance came up with very good set of numbers which should help the markets move higher.

5. The Parliament logjam continues and this is bad news for the markets. This is the only negative trigger for the markets currently,

6. The expiry is on Thursday and markets can be volatile till then.

7. The correction can take us to 8300-8400 levels which would be a good buying opportunity.

8. The PFC FPO opens tomorrow and which is a good buying opportunity as a discount of 5 % is being offered to retail investors.

All in all the markets seem to be in a good shape and the correction which started in March and lasted amost 5 months seems to be coming to an end.

Sunday, July 19, 2015

Time for some correction

The markets have been rallying since hitting 7940 and it is time for the markets to take a small breather. Let us see what can be the triggers for the correction.

1. The markets broke through the falling channel which had a height of about 600 points. Technically, the markets should rally up to 8900-8950 levels considering the breakout from the channel at about 8350.

2. The FIIs have turned positive and become net buyers for the past entire week.

3. The Parliament session begins on Tuesday and is expected  to be stormy with Vyapam and the Lalit Modi issue hogging the limelight. The land bill is most likely postponed to the winter session and the GST Bill if it is passed is a big positive.

4. The monsoons have turned into a deficit and are at a minus 6 pc level. Still, the things are not  too alarming.

5. In the very short term, the expiry is cose by and usually the markets cool off before expiry if they have been  bullish earlier.

6. A correction of about 200-300 points is very likely and most welcome before the markets try for 8800-8900.

7. If the markets continue to rally from here, the rise would be unsustainable and may lead to a sharp fall.

There are now 2 options before us:

1. The markets rally to 9300-9500 and make a new high or

2. Rally till 8800-8900 and then fall to 7500.

In case of either of the options, it does not make sense to buy now but wait for some minor correction to buy.

8300-8400 level would be a somewhat safe level to add positions.

All the positives have already been factored and we may see an intra day rally before some correction.

Sunday, July 12, 2015

What next for the markets?

The Greece referendum has come and gone. There is no clear solution and the markets went down by 1.5 pc. Let us see what the markets  have in store for us now.

1. The EU Finance Ministers are meeting this week and let us see if any solution emerges out of it. The Greece scenario seems to have been factored in by the markets.

2. The Crude oil prices have fallen by about 10 pc due  to this crisis and that will help India.

3. The Monsoons are slowing down and we are not slightly in deficit. The next 2 weeks become key for the Monsoons.

4. The Results season is upon us and TCS declared just about ok results.

5. The Monsoon session will start in about 10 days time and is expected to be stormy. I expect the markets to remain range bound.

6. The FIIs continued  to sell. After about 12000 crores worth of stocks sold in last 2 months, they are marginal buyers of about 100 crores.

7. Technically, the markets have to cross the strong resistance of 8500-8600. Till then it will remain in a trading band.

8. There are no major triggers for the markets to go up or down. In such a scenario, the markets will remain in a trading range for some time to come.

The current levels offer no safety net for buyers. If the markets correct from here, the next zone would be the 8000-8200 zone.

Sunday, July 5, 2015

Markets at Crossroads both Technically and Fundamentally

The markets closed up by 1.2 pc as the investors awaited the results of the Greek referendum. The markets are at a cross roads now, both technicaly and fundamentally.

1. The Greece referendum is on Sunday and the results will be out before markets open on Monday. If Greece elects to stay within the EU, the markets may rise.

2. The monsoons also have reached a critical juncture. We are in surplus of 16 pc with about 25 pc of monsoons gone by. The next 2 weeks become very critical for the monsoons.

3. The Parliaments opens on July 21st and with the Lalit Modi saga, there are high chances of Parliament getting disrupted.

4. The corporate results will start coming in towards the end of next week and usually during the results season the markets are subdued.

5. Technically 8500-8550 is a very strong resistance zone and a breakout above this level will open the gates for new highs.

6. The FIIs have been net sellers in the months of May and June. Still we have gained about 300 points on the Nifty since the month of April. (April 30th) This selling has been absorbed by the markets.

Now, there are 3 scenarios which can play out:

1. The markets rise on Monday on the back of Greece referendum and then start losing ground. (Most likely). We will go back to the 8000-8500 range for a couple of more months.

2. The markets breakout and we rise to new highs. (Medium possibility)

3. We start falling towards 7500 (least likely but possible)

It would not be a bad idea  to book some profits if the markets open gap up on Monday.

Sunday, June 28, 2015

Monsoon worries swept away

It was another week of heavy rainfall and the markets to went up. If this continues for a couple of weeks more, the monsoon fears may become irrelevant. Let us see what next for the markets?

1. The monsoons are already in surplus of +26 pc. This against the Met department forecast of -12 pc. Now, for the Met department forecast to come true there has to be a swing of 38 pc overall for which from now on the rains will have to be very poor.

2. Another interesting feature of the rains this time is that it has cover all regions more or less equally. Every year not only the quantum of rain but the distribution is very important.

3. Normal rains means another rate cut could be coming in August-September.

4. The Greece drama continues. For some reasons, the markets seem to be pretty confident it would be all right in the end. No markets are showing signs of panic as in  the past.

5. The markets are critically posed in the 8400-8500 resistance zones. This zone is particularly important because if the markets close convincingly above 8500 then we may see new highs coming in the region between 9300-9500.

6. The FIIs have started buying again in a small manner. If the FIIs start buying, then we would see new highs coming.

7. Also, the last fall took about about 15 sessions from 8489 and we have taken about 10 sessions to rise to a high of about 8423. If the markets take out 8500 within the next week, then we are on track for new highs.

8. The monsoon session starts on July 21st and is expected to be a very stormy session. Whatever rise has to come has to come before it starts. This is another indicator to know whether we are good to go for new highs.

Sunday, June 21, 2015

Greece still holds the Key

The markets rallied sharply by about 3 pc this week for the Nifty to close at 8224. This rise had certain strange characteristics. Let us see what these are and what could be the future probable path of the Nifty.

1. The monsoons worries were swept aside and in fact we have received 11 pc surplus rain till about 18th June. A few more weeks of this rain and the monsoon worries will get swept aside.

2. The Greek drama continues and it looks like the drama will be played out till last possible minute. There is a EU Heads summit on Monday where we would get further clues on the market action.

3. All rises in the Indian Markets have always been traditionally on the back of FII flows. This almost 300 point rally has been on the back of FII outflows. FIIs have sold for the past 12-13 sessions consecutively with buying maybe for a couple of sessions in between. On the back of outflows of Rs 1900 crores for May, June has seen about 5500 crores outflows so far.

The markets closed at 8181 on April 30th. So, the markets now at 8224 have absorbed 7400 crores or almost 1.2 billion USD outflows.

4. The monsoon session of the Parliament is only after July 20th and the results also will start flowing in only after 12th July. So next for the next 3 weeks there are no major triggers for the markets except the Greek drama.

5. Technically, 8350 becomes a very critical level both from retracement levels perspective as well as trend line levels.

A weekly close above 8350 would signal the end of ongoing correction. The markets may oscillate in the 8100-8400 range for few more weeks before see a clear move on the either side of the range.

Sunday, June 14, 2015

Greece worries hit Global Markets

The markets closed another 1.6 pc down. This correction which started in the first week of March has now gone on for more than 3 months. How much further will the correction go? Let us try and examine the reasons for the correction and how far can it take us down.

1. This is 1 of the first sizeable corrections since August 2013 when the markets hit a bottom of 5118. It could also be the correction from 5933 which the markets hit in Februrary 2014. In either case, if we look at the time component, we are correcting rises of 19 months or 13 months. The correction should last at least 5 months if look at time wise correction. Since we are in a bull market, correction can be shorter time wise but at least 3-4 months.

2. This means that the markets can remain sideways to downward for another couple of months.

3. We have almost hit the target of 7908 and the next key supports come in at 7800 and 7500. We may very well go down to 7500 but before that some kind of a bounce may happen.

4. The Greeks have to make a payment before the end of June. Talks are ongoing between the Greek government and the lenders. If the talks fail, Greece may exit the Euro. This would have a cascading effect on the global economy and the world markets similar to the Lehman effect. I doubt things will come to such a pass, but the shadow boxing is enough to keep the markets down.

5. The monsoons have arrived and are normal for the first 10-12 days of June. These are early days yet and only July will reveal what kind of rains we have received.

6. The FIIs have continued their selling and sold about 4500 crores so far in June to go with their selling of 4500 crores in the month of May.

If we look at the key events driving the markets, monsoons and Greece are the two key drivers. The Greece story may get sorted out either last next week or the week after. The monsoons effect to be clear will take sometime more, maybe 1 more month. This matches in with the 4-5 months time taken for the correction.

Strategy remains simple, buy on dips good quality stocks. The Private banks especially have come to very attractive levels.

Sunday, June 7, 2015

Markets await the Monsoon Trigger

The Markets, it seems did make a short term top in the first 3 days of the month and the RBI cut rates by 25 basis points. What next for the markets?

1. The RBI did what was expected and the Met Department downgraded the monsoons from 93 % normal to 88 % normal leading to the markets tanking.

2. The Monsoons have hit Kerala on June 5th and the Private forecaster Skymet still talks about a normal monsoon. The uncertainty over the monsoons means that the markets are not likely to immediately take off from current levels.

3. Last week, I had spoken of 2 scenarios either straight up or first a correction to 7600-7800 levls and then a move up. The possibility of a correction first seems more likely now.

4. The FIIs have sold about 1250 crores in the first week of June and the DIIs have bought double that quantity.

5. Apart from the monsoons there are no major triggers in the month of June. Crude oil prices have eased up a bit after the OPEC meeting.

6. The Bank FD Rates are clearly on the down move. A FD which was fetching about 9.7 pc about 18 months has come doen to 9 pc and is mostly likely to move down to 8.5 pc.

7. The markets have corrected from 8467 to 8057 and a short term rally to 8250-8300 levels is easily on the cards.

The Greece drama has been postponed till the end of the month and the markets will continue to be range bound till then. Best approach is to keep adding good quality stocks many of whom will be ex dividend in the next 2 months thus giving immediate tax free returns.

Sunday, May 31, 2015

May turns out to be Positive

At the beginning of the month, I had said, very rarely there are 3 months of consecutive decline and if 2 months are negative the third month is almost always positive or flat. The markets performed true to that dictum and gained 3.1 pc in May.

1. The GDP numbers came in good on Friday. The RBI policy is set for Tuesday. If no cut, then expect a very sharp cut in the markets. If there is a 25 basis points cut then expect a small rally. There would be a big rally if there is a 50 basis points cut. This seems highy unlikely at this point of time.
My favorite scenario at this point of time is a 25 basis point cut. As a reaction, markets will rally and then peter off as had happened in early March.

2. The monsoons are yet to hit the coast of India. This is precisely the reason why the RBI will not have a 50 basis point cut.

3. The markets have reached 8433 and there are multiple resistances between 8500-8600. In fact it is quite likely the markets will make a short term top within the first 3 days of the month of June.

4. There are 2 schools of thought, 1 is markets will go straight up from here or there would be a dip first and then a rally. If there is a dip, then 7500-7600 comes as a logical target and that would be a great buying opportunity.

5. Yesterday, I read an article which made great sense. It states that every 2 years there is a 25-30 pc cut in the Sensex and Nifty levels. This has happened at least for the past 10 years. The last major correction was in August 2013. If this substantial correction happens and since we are in a bull market a 20 pc cut would lead us to 7300.

6. I expect the markets to eventually top out at 10000-12000 on the Nifty within the next 1 year. This means every dip right now is a buying opportunity.

The trick is to buy Quality stocks so that even if the markets fall, these stocks can be averaged. There were 2 big events lined up. First were the GDP numbers and the second is the RBI policy. Once these are out of the way, then the monsoons become the next key trigger for the markets.

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.