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.

Sunday, December 21, 2014

Action Packed truncated week ahead

The markets hit a short term bottom at 7961 before retracing rapidly. The first round of fall may be over and now there would be some relief rallies. The coming week is truncated due to Christmas and has 2 events lined up. Let us see how the markets react to these events.

1. The markets closed flat for the week but that only tells part of the story. There was a dip of 3.2 pc in the early part of the week which was retraced in the latter part of the week. This could mean 1 leg of the fall is complete and we may see a flat to sideways markets for the rest of 2014 with a positive bias.

2. Targets on the upside come to 8294, 8373, 8451 and 8493. Only a decisive close above 8500 will tell us that this fall is over.

3. The Reform agenda has got stuck in Parliament and will be stuck if nothing happens in the next 2 days.

4. The FIIs have consistently sold in the last 8 trading sessions.The markets have not tanked completely because of DII support.

5. The crude oil prices continue to be around 60 dollars, the Russian Rouble has crashed from 30 to a dollar to about 60 to a dollar.

6. The G - Sec yields spiked up showing uncertainty and hesitancy about rate cuts.

7. On Tuesday, we have the results for Jharkhand and J&K. The BJP is expected to sweep Jharkhand but the same cannot be said of J&K. In case they perform well in both States, then the markets may rise.

8. On Wednesday is the F&O expiry. Owing to these 2 events, the markets may remain volatile.

The Strategy remains the same. Buy on dips only.

Sunday, December 14, 2014

Short Term bottom may be in sight

The markets continued their correction and fell this week also. The markets fell about 3.7 pc to close at 8224 for the week. The correction has been ongoing for a couple of weeks from the high of 8627.

1. In this present bull market each rise has been about 900 points and correction about 450 points. If we apply that logic then we may be close to a short term bottom at about 8150-8180 area.

2. If the fall continues, then it would imply a larger correction, maybe a correction to entire 5933-8627 rise which could be around 1000 points correction.

3. It would be good to accumulate a few stocks at around 8150 area and keep sufficient funds to add more at lower levels.

4.The FIIs have been net sellers in the past week and hence the market has not got any support.

5. The Gilt funds have given an annual return of about 19 pc. The max return they have give over a period of 1 year is about 25 pc. This implies a gain of another 7-8 pc over current levels can be had.

6. The Parliament session has so far failed to pass any major bills. If the logjam continues it would be bad for the markets.

7. On Monday, the markets may witness a fall due to the poor IIP numbers and the US fall on Friday. It could be a good chance to pick up a few stocks.

Overall, slowly it is time to buy again on declines. watch the 8150-8180 region carefully. If it closes below these levels then we may see 7800 levels on the charts.

Sunday, December 7, 2014

Time for caution at current levels

The RBI policy has come and gone. While the rates have not been cut, a hint of rate cut early next year has been made. The markets corrected slightly, but individual stocks continued rising. Let us see what next for the markets.

1. 1 of the key triggers for the markets, the interest rate cut has come and gone. The stocks, especially the banking stocks were rising on speculation of a rate cut. The Interest Rates on 10 year gilts has fallen to 7.93 pc which is a 16 month low.

2. The Parliament session has been in progress for almost 2 weeks and no major reform bill has been passed. 1 more trigger for the market has not materialized.

3. The FIIs will be on holidays after 2 weeks and the inflows may slow down. The markets towards the second half of December will be listless.

4. The crude oil prices have stabilized around 70 dollars a barrel. The Government has increased the excise duties on Petrol and Diesel. This will ensure that the fiscal deficit targets are met but at the same time, the citizens do not get the full benefit of crude oil price reduction.

5. Internationally, there are no major triggers for the markets right now.

6. It makes sense to book part profits and buy the stocks back when the markets correct.

Right now, it is the time to sit back and enjoy. Book part profits and wait for the markets to correct to resume buying again. markets have rallied from 7724 to 8627 a rise of almost 900 points. Usually the markets rally 900-1000 points before retracting 30 - 40 pc of the gains.

Sunday, November 30, 2014

Crash in Crude Oil prices lead the markets higher

The markets again had a very good week, topped off by the fact that crude oil prices crashed on Friday on OPEC announcement of no cut in production. All eyes are on the RBI Governor on Tuesday.

1. The markets rallied 1.3 pc on the back of FII inflows. FIIs have pumped in nearly 11000 crores in the markets in the month of November.

2. The RBI meets on Tuesday and there may be some correction, if there is no cut in the Interest Rates.

3. The Parliament session has begun and the first week was not at all promising. If this trend continues, then that may be a reason for correction.

4. Now, is definitely not the time to add more shares but focus should be on part profit booking. The same shares can be bought back at lower prices as and when the correction comes.

5. The Gilt funds are continuing with their fantastic returns. If a rate cut does materialize then part profits can be booked there too.

6. Technically, the markets had a target between 8450-8650 for this up move. How the markets react from here will tell us if there is going to be a 100 points correction or a 300-400 points correction or whether the up move will continue to 9000.

The focus now should be purely on booking part profits. Now, is not the time to make fresh purchases. Markets always give an opportunity and they surely will give an opportunity to buy.

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.