Sunday, October 27, 2013

Correction possible, but markets in an uptrend

The markets had a mild correction for the week, correcting about 0.7 pc from the previous week close. Overall, the markets are firmly in an up trend. Let us see what the pre-Diwali firecrackers are in store, if any.

1. This is a liquidity based rally and no mistake should be made about this. Once, the plug is pulled for whatever reason be it ease of tapering or hung parliament, the markets will collapse.

2. 1 leg up from 5118 is over at 6142 and the correction from it ended at 5701. If we are in a third wave up, then it can be a fast up move from 5701.
The first leg may be over at 6252 and we may correct to 6042, 5977, 5912. The up trend will be over at 5811.

3. The market rally is taking Pharma and IT stocks to new highs. We should wait and watch for the other stocks to join the party.

4. As I see the election scenario building some kind of Modi wave is surely building up. If that happens, then the markets will zoom upwards.

5. The 4 states which goto elections in November, their results will be out on 8th December which will be the key deciding factor for the rally.

Markets tend to rally in November to Feb period. If that is the case, then the markets may see new all time highs. The current scenario is that I am not putting in fresh money but selectively looking to book out profits.

A safe strategy remains to invest in fixed income and lock in the rates.

Alternatively, one can buy good quality stocks so in case the markets fall then one can always average them out.

Sunday, October 20, 2013

All set for new highs but.....

The markets continued to inch up higher by 1.5 pc to close at 6189. They are now within touching distance of 2013 highs and very near to all time highs. It looks like the scenario of 6500-7000 is playing out.Let us see what we can do in such a scenario.

1. The markets are close to all time highs but the broader market is down. When I look at my portfolio very few stocks are close to their highs. It has been driven up on the back of IT companies especially TCS.

2. Every rally has gotten narrower. This could either mean we have a sudden collapse one day or as we gather momentum, the broader market picks.

3. If we look at my older posts, the targets of 6500, 6800 and 7300. The broader markets may well pick up. The rupee seems to have to stabilized around 61-62.

4. The level of 61-62 is significant as it makes exports very competitive and at the same time the burden of imports is not too high. The CAD is shrinking and gold, silver imports have fallen.

5. The results have been surprisingly resilient and I do not recall seeing any particular poor result. The best results are out of the way ad the results declared late are usually the poorer ones.

6. The markets may get into a festive mode and continue rising. The FII money is back ad thanks to the shut down drama the quantitative easing ball has been further kicked down the road.

The strategy remains to stay invested and book profits at higher levels. It may not be too prudent to buy stocks now especially if one is not a too nimble footed trader.

Equity is just 1 of the asset classes and may not be perfect one to invest always. There are several tax free bond offering nearly tax free interest of about almost 9 pc. One can think of locking in the money in those too.

Gilt funds are also attractive but the rate of higher interest rates remains. 1 should be prepared to take short term losses if investing in gilts.

Wednesday, October 16, 2013

US Shutdown, looming debt-ceiling and their effects on the Indian market

Since the beginning of this month, the US government has been in partial shutdown. That means all government services and activities barring a few emergency and security services have come to a halt and government employees have been asked to proceed on unpaid leave. Why?

I had written a guest post for Subhankar which can be accessed here:

Sunday, October 13, 2013

Infy surprises, US deadlock continues

The markets continued with their upward march to end the week with a gain of 3.2 pc. Infy had surprisingly good results (My unscientific analysis went for a toss) and the markets looked to be in a festive mood.

1. The IIP results came out after market hours. They were poor but that mainly due to poor Capital Goods data. The Capital goods data was very good in previous 2 months so normalized.

2. The US Gridlock needs to be resolved by by Oct 17th. India is a winner either ways. The longer the gridlock continues, the longer the easy money will be available.

3. Janet Yellen is a dove. She will not pull the plug on easy money so far. Enjoy the rally as long as it lasts.

4. 6142 if the market crosses then we are all set to challenge 6229 and then 6357. The figure of 6142 needs to be closely watched.

5.This will tie in with the pre-election rally, some experts are projecting. There can only be 1 rally, pre-election or post election rally.
This also points out to hung Parliament next year.

We live in interesting times. 6100 is not a time to make fresh entry ito the markets. Time to gradually book profits as we go higher. we all get chances to buy at lower levels.

Couple of months back, markets did visit 5118. The markets are always going to remain here and we all with get fresh chances. Impulsive buying can lead to losses and regret.

Sunday, October 6, 2013

Waiting for Triggers

The markets gained 1.3 pc to close at 5907. The markets rallied smartly on Friday only to give back all the gains. The markets are currently awaiting fresh triggers. Let us try and examine what they could be.

1. The Results season is upon us.Infy Results will be upon us on Friday 11th October. They will set a trend for the markets.1 non scientific observation I have made is Infy Results usually on a Friday are quite bad. Lets see if the trend continues.

2. The US Government shutdown is still going on. If not resolved by Oct 17th, the debt ceiling will be breached leading to further problems. The markets are awaiting resolution to this problem.

3. The Rupee has strengthened to about 61 and if this continues then the stock markets will continue to do well.

4. Technically, the Nifty must clear the 5950-6000 range convincingly to go up.

5. October is a long series and it has often been seen in such long series, the markets are dormant over a period of time.

6. The bonds seem to be settling in the 8.5 % to 8.7 % range. Real recovery will not start until the bond yields come down to 7-7.25 pc range and the interest rates begin to fall.

The 3 options posted in last week's post still hold good.

From here, where the markets can be anybody's guess. There are 3 options:

a. Straight up from here (Least Likely)
b. Correct to 5500 levels and then rally up
c. Continue with the long term correction.

Options b and c have equal likelihood of occurring.