The markets tanked on Friday thus undoing the gains of the entire week in 1 week and closing the week a net 1 pc down. What led to this panic fall?
1. The surprising part of Friday's fall was that there was no big gap down. In fact the market was trading mildly negative for some time. The usual suspects of FIIs have been blamed. The FIIs sold only 600 crores of shares and DIIs bought 732 crores.
2. Even more surprisingly, for the month of August the market is down more than 4 pc but FIIs have actually bought 1400 crores worth of shares.
3. This would led to rest speculation that the FIIs are to be blamed for the markets downfall.
4. Also, the US bond yields have risen to 2.71 pc. This would lead to lesser inflows into India as last year the yield was only 1.72 pc and it has risen to 2.72 pc. This makes it a safer bet to invest at home and ot worry about depreciating currencies.
5. In technical terms, the markets still have to break critical levels. The 5400-5500 band has lots of supports and breaking of these levels and closing below them on a weekly basis only would confirm major downsides.
Strategy:
We do not know the tops or bottoms of markets. In such a scenario, it is best to identify stocks and keep averaging them. Like if you buy 20 pc of your targeted quantity at 5500, for every 300 points lower keep adding another 20 pc. So, you will end your purchases theoretically at 4000.
The oly key is to stick to good quality stocks. If the Tiscos and the SBIs of the world are available so cheap why go for second and third rung stocks.
In any case the pre-election gap of 3800-4400 should be the floor in the worst case scenario.
The bod yields are also up at 8.9 pc. I do not think they ca up much higher else industry will suffer. Interesting times ahead for the markets.
1. The surprising part of Friday's fall was that there was no big gap down. In fact the market was trading mildly negative for some time. The usual suspects of FIIs have been blamed. The FIIs sold only 600 crores of shares and DIIs bought 732 crores.
2. Even more surprisingly, for the month of August the market is down more than 4 pc but FIIs have actually bought 1400 crores worth of shares.
3. This would led to rest speculation that the FIIs are to be blamed for the markets downfall.
4. Also, the US bond yields have risen to 2.71 pc. This would lead to lesser inflows into India as last year the yield was only 1.72 pc and it has risen to 2.72 pc. This makes it a safer bet to invest at home and ot worry about depreciating currencies.
5. In technical terms, the markets still have to break critical levels. The 5400-5500 band has lots of supports and breaking of these levels and closing below them on a weekly basis only would confirm major downsides.
Strategy:
We do not know the tops or bottoms of markets. In such a scenario, it is best to identify stocks and keep averaging them. Like if you buy 20 pc of your targeted quantity at 5500, for every 300 points lower keep adding another 20 pc. So, you will end your purchases theoretically at 4000.
The oly key is to stick to good quality stocks. If the Tiscos and the SBIs of the world are available so cheap why go for second and third rung stocks.
In any case the pre-election gap of 3800-4400 should be the floor in the worst case scenario.
The bod yields are also up at 8.9 pc. I do not think they ca up much higher else industry will suffer. Interesting times ahead for the markets.
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