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.

Sunday, September 14, 2014

October 19th is the Date to watch

The markets continued to meander while the mid-caps kept up with their upward trajectory. The Election Commission has announced the dates for elections for Maharashtra and Haryana and also the dates for the counting of votes.

1. 15th October is the date when Maharashtra and Haryana goto polls and October 19th is the date when the Results will be out. with J&K polls likely to be postponed to ext year due to the floods, these become key elections.

2. Maharashtra has been under the rule of NCP - Congress for the past 15 years. with the political capital being lost in May, a setback for Congress here would strengthen the hands of BJP. At the same time if NCP Congress pull it off, then there would be a fightback against Modi Government and policies.

3. The FIIs continue to be buyers. Also, Disinvestment is planned in a big way in September October which could mute the rise of the markets.

4. The Markets should peak out between 8200-8500 sometime in the months of October and November.there could be a correction of 10-15 % from the top which would be a buying opportunity.

5. Many mid caps, at least the ones which I hold have doubled or tripled from the cost price. Such stocks it could time to book profits hold on to remainder and enjoy the dividends.

6. We could see some dip to 7900-8000 followed by a rise up towards Diwali. what is significant is the broader markets continue to move up.

7. Diesel prices may actually be cut this month followed by further reduction in Petrol prices. All this bodes well for car sales.August car sales rose on the back of Ganapati festival demand, whereas September and October would be driven by Diwali and Dassera.

Now would not be the time to add fresh stock positions but wait patiently to book profits and await for some correction to jump in.

Sunday, September 7, 2014

Upmove continues; FII flows continue

The markets gained another 1.7 pc. The markets continue to make a steady upmove with minor corrections on the way. Let us see if  this week has brought any development in the current move.

1. The GDP numbers and auto car sales which were excellent aided the up move to new all time highs. markets are all about sentiments and sentiments continue to improve.

2. FII were huge buyers in the first week of September almost buying 5000 crores worth of shares. As long they continue buying, corrections would be short lived.

3. Another key development during the week was that under recovery on Diesel has come down to 8 paisa or almost disappeared. This means the Government burden of subsidies on Diesel and Petrol stand removed. This will help in meeting the fiscal deficit targets.

4. The next week surely will have the announcement of the election schedules in key States. Maharashtra is economically very important as the funding comes from Maharashtra.

5. Technically, the markets look to hit 8200-8400 before any significant correction. Another key feature of this rally is that the mid caps are now flying. As mentioned, its all about sentiment and I would not be surprised if we hit all time highs around Diwali before forming a short term top.

6. What does an Investor do now? Invest in quality Stocks which are not overpriced. else one may again get stuck with overpriced penny stocks as in every bull run.

Overall, its time to consolidate and look at part booking of profits., Finally money earned is not notional profits but the money taken home.

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.