Sunday, November 22, 2015

The Dust Settles

The last few week have been tumultuous and now the dust is beginning to settle. Let us remove chaff from the wheat and filter the noises out. The markets gained 1.2 pc in the last 1 week. The target of 7200 is now 500 points away from the current low.

1. The Power Reform announcements if and when implemented will lead to the Discoms recovering the lost ground. This was the most groundbreaking announcement of the past few weeks.

2. Coal India FPO which will hit any moment, full subscription is advised for the Retail Investors. Coal India gives god dividends and at least Rs 20 can be expected this time around. The dividend yield itself will be around 6 pc.

3. Coal India has got the approval for exploring Coal Methane Blocks, this will need to significant new cash flows for Coal India.

4. The FDI announcements in various sectors will lead to more foreign money flowing and Defence is the key sector I see benefiting. Defence Sector from the Private parties is under developed in India and I see the Private Sector in Defence in India as a sunrise sector.

5. The time to talk is over and the Government will get down to business now. The Phase 2 of Modi first 5 year term has been kick started.

6. Power, Defence, Pharma and Banking are the key sectors I will watch at with special focus on Infrastructure lending.

Things have started moving on the ground. The next few weeks should provide us with more buying opportunities.

Wednesday, November 11, 2015

Mahurat Pick - Tata Motors

My pick for this Mahurat is Tata Motors. I do not hold this stock in my portfolio for the last 10 years and will add the first lot today. I will not look at it for 5 years and will evaluate it in 2020.

The Reasons for buying Tata Motors stock is:

1. Legacy of Tata Motors is more than 70 years old and the legacy of the Tata Group goes back even further. The Tata Group with their motto of Leadership with Trust is here to stay for the next 100 years at least.

2. The Jaguar Land Rover acquisition has been a master stroke. With this they have access to the latest technology and have moved the Research centre to UK.

3. HorizonNext program is launching cars at the right price point starting with the Bolt, Zest and Kite on its way. In the next 10 years I see Tata Motors having a car in every segment from the Nano to the Jaguar. Once they have loyal customers in place, the same customer will upgrade to the next car in the category.

4. They have right people at the top with Mayank Pareek who set up the Sales Process with the Maruti Team and Karl Slymm before him. The Best Practices from Maruti are being implemented in the Tata Motors Group.

5. India as an automotive market is growing. Society is becoming aspirational and disposable incomes are rising. Savings Rate may be going down but the spends are going up. There is a market for the cars.

6. Look at the trend of sales for Zest in last few months. Chugging along with now nearing 2500 units per month. The stability in numbers is heartening.

7. Capacity is available at Sanand for fresh cars. The Nano is an example of the innovation and frugal engineering.

8. People do not leave the Tata Group for life. They have the Tata Administrative Services or TAS which is second only to the IAS cadre in terms of trained personnel.

9. Vision is clear with the group logo "Leadership with Trust" and the HorizonNext program. This clarity of vision at the group level of Tatas and and at Tata Motors company level is heartening.

10. Price is attractive right now. No one is looking at Tata Motors. In 2001 when it was down in the dumps, I made 10 times the profit and got out.

People, Processes and Technology - the combination of these three lead  to success. Right leadership with streamlined processes in place and having the state of the art Technology in place.

On a personal note, I have owned 5 Tata Cars in the last 14 years. The Indica, Indigo CS, Manza, Nano and now awaiting my Zest.

2 CEOs have intervened to resolve my issues at 2 different points of time. If there is such strong Focus on Customer Experience and Customer Loyalty, the company is a blind buy.

Sunday, November 8, 2015

What next? Bihar Results are out

The Elections have come and gone. The Results are unveiled and the real winner of he elections is Lalu and the biggest loser is Nitesh. The markets will present an excellent buying opportunity on Monday.

1. Lalu from nowhere has come and grabbed center stage in Bihar. He has more seats than Nitesh so will grab prime portfolios. Take the credit and give the blame to Nitesh. Nitesh will become Chief Minister but what a price to pay. BJP as an ally was much better and safer than Lalu.

2. If Nitesh had stayed with the BJP, he would have had got few seats in the Union Cabinet plus Bihar he would have continued to rule peacefully.

3. Last week I had said markets should correct to 7200. We are at 7954 just about another 9-10 pc intra day. 7200 is coming and will be a buying opportunity.

4. FIIs continue to sell and that will add to short term pressure.

5. The Gold bonds being floated by the Government represent a very good buying chance to lock into Gold at low prices. I will study more and update.

Happy Diwali and stay tuned for my Diwali Pick before Mahurat Trading. This is 1 stock I am yet to enter but will buy with a 5 year horizon.

Sunday, November 1, 2015

Next Sunday will be Trend Decider

The markets lost about 2.8 pc for the week., it has already corrected about 300 points from the top on the Nifty without anyone even realizing it. The Bihar election results are due on next Sunday and that will be the tipping point.

1. Bihar elections will throw up only 2 possibilities, either the NDA or the Nitesh led front wins. If Nitesh and company win the markets will anyway tank and if Modi wins there might be a surge but eventually the markets should correct.

2. I see Yes Bank at levels where it was when the markets were at 7800 and now we are still at 8000 plus levels but Yes Bank as corrected. Banks are usually Lead Indicators of an impending correction in the Nifty.

3. The markets typically peak around Diwali and the euphoric atmosphere is generally used to reel in the last few suckers left. In October 2009, there was a sharp 2 week correction from 5181 to 4538, a correction of 12.5 %. If we extrapolate this now, 12.5 % correction from 8338 will bring us to 7295.

4. The markets are a cesspool of multiple factors. Every buyer and seller thinks he is buying at the correct price. The FII flows continue to remain iffy and I see no great traction in the money flowing.

5. The Cafe Coffee Day and the Indigo IPOs have sucked out a great deal of cash from the markets. IPOs typically occur at the peak of Bull Markets. Remember Reliance Power in 2008. The markets tanked even before the stock listed.

6. IPOs, election results, Diwali peaks all these make a very interesting time for the markets.

I would not put in any fresh money in the markets just churn the existing cash around. I still stand by we visiting 7200 and 10500 within the next one year. What will come first? My model says 7200. Models can fail so we may well see 10500 first though I would put the probability at 20 pc.

Thursday, October 22, 2015

The Stalemate continues

Markets continued to remain sideways in the last week and the 3 trading sessions this week. The result season is always flat and I believe the things will remain the same till Bihar results are out November 8th.

1. The Results season sees stock specific movement and that is what is happening currently. The markets are not going anywhere and are at a key resistance level.

2. The markets need a trigger and that trigger could be the Bihar election results. Win or lose, the markets may slide post the results. BJP winning is a bit of a long shot and even if that happens the euphoria may vanish soon. In March 2012, the UP elections triggered similar reactions where even though SP won, the markets corrected when it was clear that the Congress would not be able to play king maker.

3. The Technical Indicators are flashing several warning lights. Technical models are irrespective of fundamentals and as the days go by I am getting more and more convinced that we will visit 7200 first. Technically, first we have to clear 8350 then 8500-8600.

4. Globally, right now the story is China but then these stories keep coming back. I do not thing a rate hike will come in December this year. The Rate hike will get pushed to next year.

5. The FIIs have bought in large numbers in the past 10 days and that is what is supporting the markets. It just needs some trigger for the gun to be pulled.

6. It is a time to be very careful. The mid caps have gone up and same was seen last November. Fresh money should not be put in right now as the risk reward is most unfavorable right now. Buy above 8600 or wait for lower levels of 7200-7500.

The time frame also fits in for the traditional November to Feb rally to take place. Many years I have seen tops around the Diwali week, The current levels of the markets are most unfavorable for any long trade. Going short has its own pitfalls. We wait and we watch.

Sunday, October 11, 2015

Bihar elections will be decisive turning point for next 6 months

The markets rallied 3 pc over the week and exit polls for Bihar have turned up interesting probabilities. Various polls have given contrasting views and the next 1 month till the results on November 8th are the key. Let us explore the possibilities.

1. 1 poll gives the BJP a narrow majority while another poll gives the JDU led alliance a clear majority. It is very clear that the elctions will be closely fought and the BJP may just lose the elections. The reason is BJP won 38 pc of votes in the Lok Sabha and they need to win more to win. All State elections that have followed the Lok Sabha elections, their vote share has been less than the Lok Sabha.

2. The votes have polarised and it is too close to call. If BJP loses, in a knee jerk reaction the markets may go down but if the BJP reaches out to other parties and get key legislation cleared then the markets will rise.

3. I am clear about 2 things in mind. Within the next year the markets will visit 7200 and 10500 once. Which comes first is anybody's guess.

4. The Results season will see markets in a range typically with stock specific movements. The markets thrive on surprises and one may just see the markets surprise.

5. Now, is the time to wait and watch or invest in fixed income schemes. These rates are going to stay low for at least next 2 years.

6. The FIIs have started buying and that is shown in the markets moving up. Wait for 8200-8350 to be taken out clearly before further moves.

October is a month of caution.

Sunday, October 4, 2015

End Game of the Downmove begins

The RBI came out with a bumper surprise of 50 basis points rate cut when most would settle for 25 basis points or even the fear that there would be no rate cut. The markets were up 1 pc for the week and let us evaluate what the implications could be.

1. The 50 basis point rate cut took everyone by surprise but the markets did not flare up.Nifty has rallied up 175 points or approx 2 pc since the announcement. This also implies anything lesser and the markets may have fallen further.

2. With the Rate cut out of the way, US Fed rate hike postponed  to maybe December the immediate major triggers are over for the markets. The next triggers would be the corporate earnings in second half of October and the Bihar election results on November 8th.

3. The rate at which fixed deposit rates have fallen, its going to be a tough road ahead for small savers. This may be the last chance to lock in at decent rates in Postal schemes which are still offering 8.5 % returns. ICICI Bank has reduced FD rates from 9.5 % in March to max 8.25 %. So, the transmission of rates has already happened for FDs.

4. Technically, the markets can rally up to 8200 and then fall one more last time or fall from current levels and bottom out between 7200 and 7500. Another possibility is markets may rally straight away from current levels. I would rate this probability as the lowest of the 3.

5. In the months of August and September the FIIs have cumulatively sold 31000 crores of shares and DIIs have purchased approx 27000 crores of shares. The markets have fallen about 584 points in same period. This points  to 2 things, the markets will not oup without FII support but at the same time impact of FII selling has reduced. A sell figure of 31000 crores by the FIIs have resulted markets in falling on 7 pc. In earlier times the fall would be much more in percentage terms.

6. All stocks do not bottom out at the same time. Some stock bottom out earlier than others. So, looking at where there is value these stocks can be added even at current levels.

Bottomline: Buying time is here or almost here. One cannot time the markets. So, one can starting adding to the portfolio now.

Sunday, September 27, 2015

RBI Meeting can lead to a decline in the markets

The RBI policy is scheduled for 29th September and everyone has taken a 25 basis point rate cut for granted. Let us see what could be the probable outcomes of this meeting.

1. The Governor will announce on coming Tuesday at RBI Half Yearly Policy, the decision on a rate cut. A 25 basis point rate cut has been taken for granted by the markets. The markets will rise if there is a 50 basis point cut or a 25 basis point cut with promises from the Governor of more to come.

2. The Governor may not cut rates but give indications that he is inclined to do so in the future.

3. If there is no rate cut, then the markets will tank immediately. This year the rates have been cut thrice. The first Rate cut was cheered by the markets, it was an unscheduled rate cut. At the time of second rate cut, on announcement the markets made a significant top of 9119 on March 4th which has not yet been broken in past nearly 7 months.

4. In June, when the RBI Governor actually made the announcement on the scheduled today, the markets actually corrected. In a nutshell, the market tends to make a significant top after the RBI meet.

5. Technically, we may in last leg of the down move, with wave 1 correcting 8055 to 7723 = 332 points. Then the 2nd wave up 7723 to 7894 and ongoing. (171 points).

6. The FIIs continued to be strong sellers during the week. Till this trend does not reverse, the market trend will not reverse.

7. After the RBI policy, the next significant event for the markets will be the corporate results after 12th October and then the Bihar election results in early November. Provided the results are favorable for the BJP, then we may be set for the traditional November to February rally in the markets.

Sunday, September 20, 2015

RBI rate cut could be next Trigger

The much talked about FED Meeting has come and gone. The uncertainty continues though may be postponed by about 3 months. What else could take the markets higher?

1. The FIIs continued to be net sellers during the week. They bought on Friday. Only if they resume their buying we can see a substantial up move.

2. The Fed decision is now postponed till at least December. The RBI may cut rates at their policy meeting on September 29th. This may prove as a trigger for the markets.

3. Right now, technically we are at a very key junction. 1 more down move may be pending or we may breakout of this correction.

4. 8200 levels become the key levels to watch out. If we break 8200 and go up then we may have broken out of this consolidation phase of more than 6 months. My sense is we may see 1 more correction ending around 7200-7500.

5. Highlight of last leg of down move is that all stocks do not move down equally. Some stocks may have already made their bottoms. It could also be that we correct 200-300 points to correct the up move and then move ahead.

6. Monsoons have also picked up in the last part of the Monsoon season. With low inflation, monsoons out of the way, the RBI will definitely cut rates by at least 25 basis points.

This makes the 7700-7800 region a very strong buying zone. We cannot catch exact tops or exact bottoms. The Risk reward ratio becomes very favorable around 7700-7800 levels to buy.

Sunday, September 13, 2015

Fed Rate Hike to be out of the way this week

1 of the major drag on the markets have been the timing of the Fed Rate hike. This event would be out of the way this week, at least for next 3 weeks. Let us see how the markets react to this.

1. The shadow of whether the Fed will start hiking interest rates in September or December will be clear this week. If they do hike, then we may witness some knee jerk reaction or if it gets postponed to December then a rally. The fear is if the US starts offering higher interest rates then the money will move out of emerging markets.

2. The second event for September is our own rate cut. 25 basis points is almost factored in and for the markets to have any meaningful reaction, the rate cut would have to be about 50 basis points. I think the RBI Governor will watch the events unfolding in the US this week before making up his mind.

3. Technically, the markets seem to be close to some kind of bottom. either we have already made the bottom or 1 more down move is pending at 7200-7500 levels.

4. The technical picture is we may rise to 7950-8000 before 1 more down move to 7200-7500 or the bottom has already been made. The FIIs continue to sell and have sold stocks worth 6700 crores so far in September. This looks like pausing only once the Fed gives some clarity.

5. The Bihar elections, the results of which are due by November 11th are 1 more key trigger. If the BJP wins then it is a massive boost to the markets. If the BJP wins, the fear is the Opposition will become more aggressive in blocking legislation.

6. I have been getting repeated requests for a follow on series to the Rising Sun theme, so I am proposing to come up with a series of Stocks for the Long Term, a set of 5 to 8 stocks to be bought at current levels (out of these at least 5 would be new picks).

 Please do let me know in case you are interested. My email id is

I plan to close this by tomorrow.