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.

Sunday, November 16, 2014

Markets Continue Making new Highs

The markets continued making new highs on the back of FII inflows, weak oil prices and low inflation. The markets look set for for 8450-8650 range in the coming weeks. Let us look at the developments of the last week.

1. The oil prices corrected further last week and the Government instead of reducing the prices very smartly increased the excise duty on petrol and diesel. What this will do is increase revenue by 6000 crores in the remaining months of this fiscal year. Also, tomorrow when the oil prices rise, the Government can shield the Indian public by rolling back the excise hike instead of increasing the prices.

2. The FII flows have continued unabated. the first 2 weeks of November have led to an inflow of about 7500 crores. As long as the money flows in, the markets will continue to rise.

3. The next major trigger for the markets will be the Winter session of the Parliament which begins from November 24th. The passage of key bills will set the tone for the markets.

4. The RBI policy is in early December and it remains to be seen if the RBI will cut interest rates.

5. Gilt funds have shown a smart rally and returned about 10-12 pc in the past 6 months.

6. Profit booking can be done at slightly higher levels. If the markets rise by another say 200 points on the Nifty this week, I would suggest partial booking of profits.

Everything looks hunky dory at the moment ad it is safe to book profits in the markets. remember the markets have risen from 7724, a rise of 691 points ad a breather may be round the corner.

Sunday, November 9, 2014

Markets consolidate their gains

It was a truncated trading week with the markets open only for 3 trading sessions. The markets closed flat for the week but many stocks hit their all time highs. Let us explore what can happen next.

1. The Modi Government Cabinet expansion is a significant milestone. It inducts many new dynamic faces like Manohar Parrikar and lessens the workload on existing Ministers.

2. The Winter session commences on November 24th and all eyes will be on how the Government clears the pending legislation. This can influence the way the markets move.

3. With the Bank of Japan announcing stimulus, the easy liquidity continues. This will ensure the FII flows and the data for November has been positive so far from the FII inflows.

4. The crude oil prices continue to remain low thus helping the fiscal deficit.

5. The markets have given a technical breakout and the targets could be between 8450 - 8600. There could be a 10 pc decline either before the budget or after the budget.

6. At 8300+  levels, it does not make sense to create fresh positions but rather book partial profits so that the same funds could be re-invested at lower levels.

7. The Gilt 10 year yield has dropped to 8.21 pc. it could drop further depending on RBI action.

A 10 pc correction could be expected after we rally about 200 points higher. That dip would be a buying opportunity.
 

Sunday, November 2, 2014

Breakout by the Markets

The Markets closed much above their all time highs on a weekly basis on back of stimulus by the Bank of Japan. The markets have given a breakout and should continue their momentum upwards for some time. the markets have a lot going in their favour at the moment.

1. The Diesel price cut brings diesel down by Rs 6.3 in past 10 days in Mumbai. That is almost a 10 pc cut and this will cool inflation down. This can result in a rate cut and Gilt funds are making merry with Interest Rates declining. Gilt funds make money when interest rates fall.

2. The Bank of Japan stimulus may lead to more money coming to India. close ties between Shinzo Abe and Narendra Modi, Softbank investments in Indian companies all point to more focus on India by the Japanese investment community.

3. The political winds blowing in favour of the BJP has already led to some bold economic decisions being taken. It looks like modi is walking the talk.

4. The FIIs bought almost Rs 3750 crores worth of shares in the last 3 trading days of October. If the  trend continues, the markets will continue to rise.

5. The Indices have moved to all time new highs and now the second line of stocks will start moving up. Minimum targets from the current levels of 8322 are 8450-8500.

6. At higher levels again part profits can be booked, remember the money taken out from the markets is money earned.

I expect the rally to continue for next 2-3 weeks at least till the Winter session of Parliament commencing on November 24th.

After that what happens in parliament will determine the course of events.

Sunday, October 26, 2014

Markets at Key Cross Roads

It was a good Diwali truncated week for the markets. The markets gained 3 pc to reach 8014. From here, we are truly at crossroads. Let us explore what can influence the markets from here.

1. The reforms continued with the Coal Ordinance being announced. Coal is a key factor in powering India's thermal power plants and most of the plants are coal based. This will help all the power plants which are stuck up due to lack of coal.

2. The Defense logjam got a boost when the Government cleared deals worth 80000 crores. The Government in the span of 1 week has made 3 clear policy decisions on key areas like Diesel and Gas Pricing, Coal Mining and Defense Procurement.

3. There could be a correction of about 1000 points either now or after the budget. Corrections are always healthy and help in removing weak hands from the markets. The markets have corrected from 8180 to 7724 before bouncing back to 8014. Above 8100, one can be sure if  there is sustenance of 1 more move up to 8400-8500.

4. The weak crude prices go a long way in helping the Indian economy. Narendra Modi government in a way has the beginner's luck. Low crude prices is a big slice of luck and disinvestment of ONGC should be done now to raise funds.

5. The FIIs were net buyers this week and though growth is slowing down in US and Europe, India would remain the preferred buying destination.

6. 1 characteristic of this fall was that though many front line companies did not correct much, it was the stocks on the speculative side which lost out big time. This again goes to prove that it pays to stick to quality stocks.

The future of the stock markets now is in entirely hands of the Government. The Mandate has been won, Maharashtra and Haryana have been conquered, roadblocks been removed and it has been 5 months since the Modi Government has been sworn in.

All further gains would be dictated by reforms and Government action and nothing else.

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.