Sunday, May 26, 2013

Good chance to accumulate Quality Stocks

The markets tanked about 1.3 pc. After 5 weeks of solid up move, this correction was much needed and healthy. Let us try ad see the road ahead for the markets.

1. The up move which started from 5477 can extend to 6350, 6500 or 7000. The first leg got over at 6229 and this is the correction to the move from 5477 to 6229. The markets can halt at 5942, 5853 or 5765. Only below 5627, the rally has ended.

2. The prices of crude oil have stabilized at lower levels and gold imports are also slowing down. This will help the economy and the current account deficit.

3. The Gilt prices have come down to 7.1 pc down from a high of 8.9 pc about a couple of years ago.This will help the Government lower the borrowing costs.

4. Looking at the Open Interest, Expiry is expected at around 5950- 6050.

5. Larsen and Toubro came out with poor results but its Order Book has improved. The current correction is a good chance to add the stock.

6. The current fall has all the characteristics of correction and not a fresh down move. This may well be the last chance to accumulate good stocks before a final blow out rally.

7. In our statistical analysis at the begininng of the month, the range provided was :

The moves could play out as:

1. Up in the beginning of the month, then highs of around 6300 and settle down near 6000.
2. First a down to 5600-5700, then a close to around 6100 levels.

We stopped at 6229. So, the number 6000 becomes a key number and there is a lot of open interest  bulit around this umber.

8. The Monsoons have almost reached Kerala. A good monsoon is the next trigger for the markets to move up.

This is the time to add good quality stocks. The time to reap the harvest would come in after the monsoons around September.

Sunday, May 19, 2013

Markets looking to test old highs

The markets gained another 1.3 pc to touch 6200. There are several reasons why the markets can touch the previous highs and exceed them. Let us try and explore the probabilities.

1. The FIIs are continuously in the buy mode. The liquidity is propelling the markets higher. The DII selling is easily getting absorbed.

2. The Parliament is having its recess and will open only in the Monsoon session in the last week of July. This will ensure that there are no political storms to spook the markets.

3. The Monsoons are said to be on track.Looking at historical data and probability we should be having a good monsoon.

4. Inflation is down and due to this, the interest rate cuts will continue. This will lead the Banks and Interest rate sensitive stocks to new highs.

5. Crude oil is down and this will help the Indian economy. Gold prices continue downwards. This also implies lower imports. After the Indian gold demand sees lower prices then the buying frenzy will abate. The fall in Gold has been so sharp and so deep that I will we are unlikely to see a recovery in Gold prices before Diwali.

6. Every small dip is a buying opportunity and profit booking at every level is a must.

7. The PSU Banks have not yet rallied and say an Andhra Bank with a price of Rs 92 ad a dividend of Rs 5 offers a dividend yield of 5.5 % tax free.

8. The Gilt funds have given amazing returns of absolute 11 pc in the past 6 months. Their performance will peak in the next 1 year.

The strategy remains the same. Buying every dip ad booking profits at higher levels thereby lowering the cost price of the shares in the long term portfolio.

Friday, May 17, 2013

Stock Market Behaviour Prior to Elections

The next general elections for Lok Sabha seats are less than a year away. Political parties have already started pre-election activities like choosing likely candidates for the PM’s post and discussing possible alternative alignments for government formation.
The period prior to a general election is usually one of uncertainty for investors. Uncertainty leads to selling, or at best, staying on the sidelines – neither being particularly conducive for a bull phase. In this month’s guest post for Subhankar, I had presented a different viewpoint

Continue Reading at:

Sunday, May 12, 2013

A Look at the Longer Term Elliot Wave Chart

It has been a long time since we have looked at the big picture. Now, is a good time to look at this picture.

1. The up-move which started from 4532 in Dec'11 can be of 3 legs.

A - 4532 - 5629 = 1097 points

B - 5629 - 4770 = 859 points

C - 4770 - xxxx

where xxx can be 4770 + 1097 = 5867

                            4770 + 1.618* 1097 = 6544

                             4770 +2*1097 =  6964

                             4770 + 2.618* 1097 = 7641

The 1st target has been met and now the 2nd target seems likely. Targets beyond the 2nd target, let us ignore for the time being.

C -1 = 4770 - 6112 = 1342 points

C-2 = 6112 - 5477 = 635 points

C-3 in progress.

C - 3 can have targets of 6306, 6500.

All these are targets are negated below 5604.

What does this mean for Investors?

All dips are buying opportunities. A dip should materialize soon to 5850-5900 zone which should be a buying opportunity.

In my guest post for Subhankar in the mid-week, I will analyse the implications of the Political situation.

Sunday, May 5, 2013

How have Markets fared in May?

For the month of April, the range arrived statistically was 5500-5900. We ended up doing 5477-5962 with a close at 5930. Now let us look at the month of May. There is one disturbing fact for May.

1. The low of the May month is always much below the close of April moth. The close for April was 5930 and a close of 6 pc below that leads us to a figure of close to 5600.

2. Overall, May month on an average leads to a flat close.There are swings of at least more than 3 pc either sides on a closing basis. This means we may close the month of May at 6100 or 5750.

3. What this also implies is that for the month of May, the upside is limited. In case, of a large fall early on the we will spend the rest of the month covering up for the fall and makig a margial gain.

4. Taking, this hypothesis further it means we are likely to get 2 sufficiently large moves on either side. If 1st half of the moth is negative the the second half will be positive or vice versa.

5. If we take the May high, the it has also usually been at least 6 pc higher than the April close. This could mean upsides of 6300.

If we look at all the probabilities, it means we are in for big moves in May.

The moves could play out as:

1. Up in the beginning of the month, then highs of around 6300 and settle down near 6000.
2. First a down to 5600-5700, then a close to around 6100 levels.

The conclusion from this is that may is a month of big moves, once one catches the direction it would pay to hold on to positions till a move of about 4 pc is made in any 1 direction.

5700 and 6100 remain the immediate 2 possibilities with extreme moves taking us to 5600 or 6300. Right now we are almost at the center of the range. Sustaining below 5900 or above 6000 will give us the clues to the next moves.