Liquidity Keeps Markets afloat

Lets look at some of the stats for the month of September:

1. Nifty has been 6.34% up as compared to 31st august

2. FIIs have pumped in 10,854 crores in September and DIIs have put in 518 crores in September.

3.For the year from Jan'09, FIIs have put 16300 crores and DIIs have put 23535 crores.

The above Stats say a lot. Out of a total of about 40000 crores pumped in 9 months,11300 crores have come in September which amounts to roughly about 26 pc of inflows yet the market moves up only 300 points as compared to 2400 points from the bottom.

So now in spite of so much buying the market is not moving means someone is selling. The Smart Money is moving out of the Markets.

The FIIs display a herd mentality.Now, if this FII flow were to disappear then there would a stampede towards the exit doors.

The cheap dollar and low interest rates in the US are fueling this fascination for emerging markets. FIIs tend to churn the money around.

China down 18 pc from its peak value, Hong Kong about 4 pc and the Indian markets 1.58 % from the peak.

India story is looking good domestically, the only thing which can spoil the party is global triggers.

The Best option is to keep a trailing stop loss for positions at the 50 EMA which comes at 4658.

Markets Tomorrow - Key Levels

I would be putting in key levels for the next trading day for those interested. In case, you find them useful, please let me know so that I would keep posting them here.

5 EMA, 20 EMA and 50 EMA are key support levels. The Bollinger band tops are key resistance levels

BBtop 15, 20 5039, 5000

5DEMA - 4984

5 EMA - 4928

3 EMA - 4956

7 EMA - 4902

10 EMA - 4866

20 EMA -4777

50 EMA -4601

STochs - Buy

MACD - Buy

Markets: How high can they go?

The Markets keep rising. All the prophets of doom and gloom are decreasing. The bears have gone into hibernation.Happy times are here again.

Lets check out the fundamentals. Domestically, the things have improved definitely. Forget the IIP numbers which are overcooked by the government anyway. I look at the Auto Sales numbers as a key measure. Maruti is producing at peak capacity. They are now only constrained by Production limitations.
Indian IT companies are again bagging orders. The freeze is beginning to thaw. Domestically, things are beginning to look bright. My sense is that the next downward trigger will not come domestically unless its a Mumbai style Terrorist Attack. This time, India will not be expected to give a muted response.
Globally, things are seemingly looking up. The US and so the world markets are at new 2009 highs. It seems pumping in cash has done the trick. I will keep a watch at China. They are often the leading indicators of things to come. It seems a dichotomy that Chinese Markets are tanking when Global Markets are partying.
How does China become so important?
They hold a large amount of US Treasury bills, they are largest purchasers of US debt and FIIs for BRIC countries look at China for direction.
The US data looks towards a stabilizing of the job markets. The rate of decline has reduced.
The nifty has gone up 6.75 % in September. This has primarily been due to FII inflows of almost 8000 crores. DIIs have put in just 800 crores. The Party will continue till liquidity keeps pouring.
The FII or the so called smart investors often so a herd mentality. When they stampede towards the exit they do not give an opportunity to exit.The Nifty is at a P/E of 22.31. This is historically where it takes a dip to at least 19.

So what should you as an investor do?
If you are already invested and looking to book profits, keep booking at every rise of say 200 nifty points or keep a trailing stop loss of 20 EMA which stands at 4777 as of yesterday.
If you want to invest money look for dips to buy. Again, one could look at dips to 50 EMA to buy which comes to 4601.

Remember, if the crash comes it will be swift and brutal. So, you will know that it is not time to enter.

The markets had come 50 EMA levels last around 18-19th August, nifty 4353 which was a buying opportunity.

Shanghai Noon:Will History repeat itself?

The global markets are interlinked for all the talk of decoupling. The Chinese markets are supposed to be a advance indicator of what is going to happen in other emerging markets.
In Oct 07 when are markets were hitting new highs, the Chinese market corrected sharply.They were 21 pc down from their peak in 2 months.Then recovered 13 pc before the Jan 2008 meltdown.
This time, they corrected even more sharply in July down about 23 pc from its peak when our markets were hitting new peaks. They have now rallied back about 13 pc again.
Last time, it took about 3 months for the fall, rise and then the big fall. This time, it has been faster. The fall and the rise have consumed about 7 weeks.
Will history repeat itself?
Domestically, now the cues have been factored. The next positive triggers could be the half year results in October unless we have some unforseen event globally