Sunday, April 28, 2013

RBI Policy: All factored in?

The markets soared again this week eking out a gain of 1.5 pc. The RBI Policy has been factored in with all this rise. Let us see and explore what the markets have in store?

1. The markets have built in so much expectation that a 25 basis point announcement will lead to the markets correcting. Only 50 basis points and more can help continue the rally.

2. The markets have also reached the key 5920-5950-5970 levels. It has been an almost breathless rally from 5477 levels in a matter of 2 weeks. The markets may well keep going up in the early part of the week.

3. The RBI announcement is also due on a Friday.Last few years I have been noticing that whenever key announcements are on Fridays, people tend to take money off the table. Infosys is a key indicator for such types of trends.

4. If the markets are to rally to new highs, a correction is necessary and healthy. Maybe the credit policy may be an excuse. Everything is factored in the markets and events are usually just excuses for corrections.

5. The Gilt funds continue to be the best performing asset class easily giving 12-13 pc safe returns.

6. Gold has given a bounce but this bounce should be short lived. One can think of buying gold at lower levels or above the 200 DMA at 1620 USD.

7. If the correction happens, it would be a good time to add good quality stocks which ca be traded and sold at 10-20 pc higher.

8. I still believe the entire bear market from early 2008 is still not over and 1 last dip to cover the pre-election of 3700-4000 is still pending.

9. The Gap may well be completed with the next elections making it a nice cycle from 1 General Election to another.

By part booking profits, one ca lower the cost price of shares, enjoy the dividends and keep the shares for the future.

I would certainly not add at these levels but wait for a correction to add. We can easily see the levels of 5650-5725 in early part of May which would be the time to add positions.

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