Sunday, March 1, 2015

Budget out of the way: What next

The Union Budget was presented yesterday and it was a good budget in the sense there were no major populist announcements. The markets rallied on the back of the budget especially the Banking Stocks.

1. For the week, the markets were up 0.8 pc and for the month 1.1 pc. The month of February has gone by and markets usually make a top sometime in March if not February. Prudence would therefore suggest to book profits if the markets rally from here.

2. Since there are no unpleasant surprises in the budget, one can expect the markets to rally a further 400-500 points from here.

3. The Budget was good in the sense, it did not give away free gifts while at the same reducing corporate taxes from 30 pc to 25 pc.

4. The FIIs bought 6700 crores worth of shares in Feb and all this came in the last week of Feb. This can mean the markets can go higher from here.

5. The fuel price hike makes no rational sense. While bringing down the prices, the delay in reduction, excuses trotted out were that 6 weeks old inventory has been to be exhausted first. While increasing the prices, the same rationale is not used.

6. The hike in Service tax will lead to lesser income in the pockets of consumers.

All in all it was a neutral budget with no big bang announcements as well. The current rally can go on for 1-2 weeks more but there is no new trigger to sustain it. Also, how the Parliament session goes can influence the movements of the Nifty.

Around March 15th or so, liquidity concerns for Advance Tax payments can also arise. At such times the markets are flat or negative.

The early part of next week should see some upward movement based on positive feedback about the Budget. Post that, there are no triggers to take the markets up higher.

Sunday, February 22, 2015

All Eyes on the Budget

The markets closed flat as expected, since the Budget is the next major event which will occupy the minds of investors in the short term. Let us see where we could be headed.

1. If we get a good budget we may test the 9300-9500 range. If the budget disappoints then we are headed to the 7500-8000 range.

2. The markets after the Modi Government has been elected has gone from about 7200-9000 and traded in this zone. If the budget is not flattering we may go back here.

3. It has been 9 months since the Government has been in power. It has got the benefit of low crude prices by way of which it has collected about 20000 crores in excess tax as well saved at least  an equal amount in terms of subsidy.

4. The FIIs have bought again in the last week. This is an encouraging sign.

5. The Greece problem has been pushed forward by 4 months. So, till end of June the liquidity can continue.

6. This market was booming basically on two factors. Easy liquidity and hope from the Modi Government. The liquidity factor will still continue and the hope factor remains hinged on the Budget.

7. The Global factors have eased off and the Budget session will see important legislation come up for debate. If the Government is able to get these passed without much ruckus, then the markets will rally.

Best strategy is took book profits if we get a god budget and if the markets tank, wait for lower levels to add stocks. This is because if the budget is disappointing, the markets will not rally in a hurry.

Sunday, February 15, 2015

Markets on track for new all time highs

The markets recouped all the losses made last week and back to were they were at the end of January. The AAP victory was digested and all eyes are on the Budget.

1. It is said that in Bull markets all the bad news is ignored and in Bear Markets all the good news is ignored. The markets have shrugged aside the AAP victory, the sucking out of liquidity by Coal India and HDFC issues of about Rs 30000 crores and are very close to their all time highs.

2. The next major trigger is the Union Budget. If the market is at all time highs near the budget, it is prudent to lighten one's positions as the markets may correct after the budget. Expectations are high and any disappointment can lead to correction. Another feature of the Budget this time is that it is on a Saturday, giving people time to digest the news as the markets will be closed. This also means no time to exit the positions as the markets will open gap up or gap down on Monday.

3. The FIIs have sold on all trading days in Feb except the last day on Friday. They have sold about 3500 crores worth of shares and the markets have not moved. It means in FII inflow absence the markets will not be able to move up.

4. The Global cues remain supportive for the continuation of the up move. If we look at the markets technically, then a close above 8900 opens the doors for a close above the previous highs.

5. The crude oil prices have increased from about 45 dollars to a barrel to about 60 dollars a barrel. This level is to be watched. Any further increase in crude may affect the markets. 60-70 dollars to a barrel is the optimum range for the Indian Markets.

6. The 10 year G-Sec yields seem to have to stabilised at about 7.7 pc.  The yields tend to bottom out at around 7 pc and top out around 9 pc.

All in all, good times for the markets but profits need to be booked just before the budget in case the markets are riding high. If we get a not so good budget then we are headed to 7500-8000. In case, we get a good budget then the rally may just extend.

Sunday, February 8, 2015

Correction after a rally

The markets corrected another 1.7 pc this week. After a breathless rally, the markets look to correct. Let us see the road ahead for the month of Feb.

1. The Coal India FPO and the HDFC offers sucked out about 32000 crores worth of liquidity. This was also one of the reasons why the markets were subdued.

2. The FIIs sold 1100 crores worth of stocks and the DII sell figures were flat. Basically, the market did not have any buying support from any of the institutes.

3. The exit polls point to an AAP victory in Delhi. The Nifty may come down another 200-300 points over this before the pre-budget rally starts.

4. The Union Budget at the end of the month is a key trigger for the markets.

5. The next support levels lie at 8627, 8525 and 8416 levels.

6. The Budget rally can take us to 9200-9300 levels.

7. The Delhi elections by themselves are meaningless in the National Context as there are only 2 Rajya Sabha Seats from Delhi. The spill over effect can be in Punjab where elections are still 2 years away.

Now, is the time to add solid stocks to the portfolio and await the Union Budget.

Markets correcting were not a surprise as a whole lot of new paper was absorbed by the markets. Monday Tuesday may see some more correction over  the Delhi polls. After, Wednesday one can think of fresh positions for the budget.

Sunday, February 1, 2015

Delhi Elections and the Union Budget - The next 2 triggers for the markets

The markets dipped 0.3 pc for the 4 trading sessions last week but that is only half the story. There was a spike up to new all time highs and the Coal India FPO also was completed.

1. The Coal India FPO was a big relief to the Government as they will mop up close to 22400 crores. The healthy demand especially about 1 billion dollars worth of applications from the FIIs is encouraging.

2. The market has basically run out of triggers now. The Delhi election results on the 10th of Feb ad the Union Budget on the 28th of Feb are the 2 key triggers in the very short term and the medium term.

3. The next upward targets for the market are at 9200 and 9500. Key support lies at previous top of 8627.

4. The RBI policy meeting on Tuesday could influence the markets. I do not expect any immediate rate cuts in the offing.

5. Further divestment by the Government in ONGC and NHPC are expected to suck the liquidity out of the markets and I expect a rage bound market in February 2015. The broader range could be 8500-9100.

6. The month of Jan saw a gain of 6.4 pc. Whenever there has been a substantial gain in the moth of Jan, Feb has been negative or marginally positive. Looking to a 2-3 pc upside from here gives us 9072 as an upward target at the max.

Now is a time to clean up the portfolio get rid of weaker stocks which have run up and accumulate stronger stocks on dips.

Sunday, January 25, 2015

Markets Rise on Stimulus Announcement

On the back of the ECB stimulus announcement, the markets rose 3.7 pc to close at their highest levels. Let us try and see what further positive triggers can be there for the markets.

1. The FIIs have been heavy buyers and have bought stocks worth 7000 crores in the last 6 trading sessions. This is reflected in the large caps going up.

2. If we extrapolate the previous up move from 7723 to 8627, we get a target of 8965 or 9523. we will reach there but after corrections.

3. In spite of the market going up on Friday, the Advance Decline ratio was negative. Simply put 2 stocks were declining to 1 stock gaining. This means only a few stocks were taking the market up on Friday.

4. The large caps have rallied and the next week may see the Nifty not going anywhere but the mid cap stocks rallying from here.

5. The Obama visit may be a trigger for some up moves if we hear some big ticket announcements.

6. The Greece elections are on Sunday and our markets are closed on Monday. Let us see how this impacts markets on Tuesday.
My experience is that any fall is short lived if it is based on global factors and it can be a buying opportunity.

7. All corrections since the rally from 5118 in August 2013 have been 500-600 points. I do feel 1 correction is due of about 1000 points.The only question is when.

The Budget session is on the Feb 28th. I expect further direction to the markets after the budget.

Now is a good time as any to book profits and lock in those profits in other asset classes like Gold or Fixed Deposits.

Sunday, January 18, 2015

Markets poised at critical levels

The surprise RBI announcement led to the markets soaring away and the Nifty gained about 2.8 pc for the markets to close at 8514, tantalizingly close to the previous high. Let us try and see what direction the markets take from here.

1. The assumption was that the markets are correcting down from 8627 in 3 waves.

Wave 1 = 8627 - 7961
Wave 2 = 7961 - 8531 (ongoing)
and Wave 3 to take us down to at least 7961 levels.

This hypothesis will be nullified if the markets cross the previous highs from here.

2. If the markets break the previous highs, then we can see a rally till the budget at least to take us to 9000 levels.

3. The Gilt funds gave further returns when the yield for 10 year G-Sec came to 7.67 pc, I would suggest to recommend booking part profits at this level in Gilt funds.

A thumb rule for Gilt funds is keep adding positions when the yield crosses 9 pc and keep part booking yield goes below 7.5 pc.

4. The crude oil prices further weakened and look to be remain weak for the first half of 2015.

5. The FIIs have been marginal net sellers for the month of Jan. With the Government divestment coming up in PSU companies, the upside may be capped because of that.

The uncertainty over whether we are still in a correction or we are headed to new highs will be cleared in the coming week.

Sunday, January 11, 2015

Big Moves Ahead

True to form, the markets kicked off January with violent moves in both the directions. For the week, the markets ended down 1.3 pc on the Nifty. Let us look at the coming weeks.

1. Infy with excellent results, gave a late fillip to the markets on Friday. With the rupee having depreciated, the IT stocks stand to gain. Infy maintained guidance even in dollar terms. What will now happen, is that the difference in P/E between TCS and Infosys will narrow. In the past few years TCS had ran well ahead of Infy and now that will decrease.

2. The FIIs were net sellers the entire of last week and have sold 2600 crores worth of stocks for the month of Jan. This is a worrying trend as without FII participation, the markets will not rise.

3. We are again at the key resistance levels of 8300-8400. For the markets to make new highs, they will have to sustain above 8400-8500 region convincingly.

4. Globally, crude oil has fallen below the 50 dollar mark and we should now see some amount of bounce. A sustained period of low crude oil prices bodes well for the Indian economy.

5. The next week should see more corporate results come in. Usually, the results are more or less factored in the prices.

6. There are no real triggers for the markets to go up and sustain there. The major trigger would be the Union Budget which is still 45-50 days away.

The markets usually display 2 kind of trends. They either go up before or after the budget. Very rarely do they go up both times. This time the Budget is highly anticipated as the first full year budget of the new Modi Government.

If the market go up then book profits and if they fall to 7700-7900 levels then fresh stocks can be added. buying now, is sort of buying in no-man's land. The Risk will be high and the reward will be lesser.

Sunday, January 4, 2015

Infosys Results to set the tone for January

The markets were rising in the first 2 trading sessions of 2015. The markets rose 2.4 pc in the last trading albeit on low trading volumes. The real test for the markets begin now. There are several reasons for the same.

1. Low volumes were the characteristic of the holiday week, thus making it easier for the markets to rise. When the trading begins in full swing from Monday it remains to be same if the same momentum can be maintained.

2. The FIIs will return on Monday and their support will  be critical. In  the first 2 days of 2015, they just bought 278 crores worth of stocks when the Nifty rose by 113 points.

3. The Results season kicks off on 9th Jan when Infy announces its results. Markets are usually muted during the results season.

4. Technically, the markets have reached a critical resistance zone. If it breaks the 8400-8500 region it will straightaway head to 9000-9200 range. On the other hand, if it corrects from here, it can test the 7700-7900 band again.

5. There have been a series of ordinances in the last week of December so no further announcements can be expected in the short term.

6. The Gilts are expected to inch lower in terms of Interest Rates. The 10 year bond is trading right now at 7.87 pc. With an expected RBI rate cut, it can head to 7.25 pc - 7.4 pc range.

The next week, should set the tone where the markets are headed at least for the month of January.

Sunday, December 28, 2014

2015: Crunch Year for Reforms

The markets have rallied in 2014 on hope. they have rallied about 30 pc on hopes of a new Government and good Governance. 2015 is the crunch year when the Government has to deliver on the promises made.

1. It is soon coming to crunch time for the Government. The Reforms have to be put in motion. The Union Budget is the first milestone which can be seen.

2. The Government has taken an ordinance route for key bills but they will have to be validated in the next Budget session. The Budget session starts in late February.

3. The markets are now at a key inflection point. They can continue rallying on hope till the budget or continue their correction and then if the budget is reform oriented then rally after the budget.

4. The FIIs have been net sellers the entire month of December. This has partly been due to global reasons. The US posted a GDP growth of 5 pc and the money is flowing towards the US. The Dollar is strengthening and the US equity markets are on a roll.

5. Technically, the markets should touch about 9000 once in the first half of the year.

6. After hitting the top of 8627, the markets corrected till 7961 a fall of about 666 points. Then the markets rallied till 8365 a gain of  404 points. If 1 more down leg is pending, then this could have targets of 7699 or  7300.

This is now a market which is a buy on dips markets. The area around 7700-8000 offers a very good buying opportunity.

Even the Gilts have gone back to a yield of about 8 pc which also gives another entry point into the Gilt funds.