Lack of Triggers for the Market

In the absence of any major decisive triggers for the markets, they continued to drift aimlessly losing another 1 pc for the week. Let us see if any triggers exist before the election results of the State Assemblies on the 8th of December.

1. The Talking Heads on Television continued to play games with tapering stoppage or no. This is a good game for traders. Short term movements of 100-200 points on either side are the norm.

2. FIIs have net bought 5600 crores for November so far and DIIs have sold 8200 crores. The markets have corrected by about 4.8 pc so far.

3. All eyes for any major swing will be on the 4 major State election results. As I see it, these results will have no major impact on the General Elections and are likely to favor the BJP in Rajasthan, Madhya Pradesh and Chatisgarh. Delhi should head for a hung assembly. The markets may take it as a thumbs up for the BJP and rise if the results favor the BJP. Worst case would be an equal split between the Congress and the BJP.

4. Technically speaking the markets have reached the 5 week low ema at 5996 and some bounce can emanate from these levels. If no bounce then the markets can touch lower levels, correcting the rise from 5701 to 6342. Levels in this case would be 5946, 5870 and 5829.Any fall below 5829 will be a harbinger of larger falls to come.

5. The area around 5850-5900 has a confluence of supports. They rage from the 200 DMA to the equality of last fall, to 38.2 pc retracement level of entire rally from 5118.

6. Pharma and IT stocks have led this rally and there would be no harm in booking profits in these sectors and taking the money home. Finally only the profits booked is the real profit. Rest all is illusory.

7. The bond yields are hardening at around 9 pc. At these levels, for a 2 year investment G-Sec funds are still a good buy.

Now, is the time to lie low and do detailed study to invest in quality stocks when the time is right.

Correction Continues

The market continued its correction, dipping further by 1.4 pc. Let us try and examine the pros and cons of  the market movement.

1. The markets are correcting gently, about 4 pc from the Diwali top. This could just be a bull market correction, looking at the slow nature of the fall.

2. The FIIs have been net buyers for all the trading sessions in November 2013. Only, when they start unloading will the markets have a major fall.

3. The major question is why are FIIs buying? It is not becuase of Narendra Modi but the continued avaailability of easy money thaks to Quantitiave easing. The battle is to attract money to India.

4. Jaet Yellen will take over from Ben Bernanke in Januarary and her statements indicate the divish stace of hers. If that happend then get ready for ovember to Februrary rally.

5. The markets have support around 5850 - 5900 levels.

6. The next major trigger for the markets is the State Election Results on December 8th. A BJP sweep (even if there is no material impact on 2014 elections) will lead to the markets zooming.

7. The Gilt yields continue to trade around the 9 pc mark. Only those with a long term view can stick to Gilts.

The markets are entering a quiet phase and it can be the lull before the proverbial storm. Buy on dips and stick to Quality stocks.

Correction in a bull phase

The markets dipped by around 2.8 pc for the week. The markets hit a new high for Diwali and since then have been correcting. Is it just a correction or is it something else?

1. The thumb rule is that the markets tend to react from the previous top. 6350 has been a sort of double top. It is natural that the markets react from here and then come back and blast through.

2. This has been an unusual correction, the large caps have corrected and the mid caps have rallied. This also means it should just be a correction before resuming the journey upwards.

3. The last meaningful correction was around 441 points. So if we extrapolate then we can correct till 5902.

4. Coming to fundamentals, what has this rally been riding on? Many talking heads claim it on the Narendra Modi effect. It is too early to talk about that. Elections are ot due till May 2014. A good 8 months away and anything could happen.

5. The markets have been rallying on easy money from abroad. The putting off of tapering, has resulted in flows of 3 billion dollars in October and November also about 1500 crores till date.

6. If tapering happens then the flows will stop and the markets will correct.

7. November to February is a period when the markets traditionally rally and hit a top in Feb-March. Let us see how this seasonality plays out this time.

8. The next major data point would be the State election results in December though that is not a relaible barometer for the National elections.

9. The G-Sec yields have almost touched 9 pc. Those ivesting for the long term can park their money here as a hedge when stocks correct to put the money back. The short term party is over though for Gilt funds. Oly those prepared to hang on for 2-3 years should invest.

10. This is a good time to clean up one's portfolio. If junk stocks rise, sell them without thinking twice. Ultimately only quality value stocks matter.

Market on the upswing:Happy Diwali

The markets continued their solid performance and gained another 2.6 pc to close above the previous 2013 high. We look all set to challenge old highs and how the markets react from there will set the tone of the markets.

1. The PSU Banks joined in the party this week and now one needs to see if the beaten down sectors join in the party or the rally fizzles out. Sustained closing above 6357 will herald fresh new territories to be conquered.

For this Diwali, I would strongly reccomend Godrej Properties trading around Rs 370. It recently came out with a rights issue at Rs 325 and the promoters hold about 75 % stake in the company. It comes from the house of Godrej, one of the best run management in the country.

They have premium projects across the country and the safety net comes in the development of huge Vikhroli land bank. The Godrej group has mandated that all real estate development of Godrej group companies has to be through Godrek properties only. They are also getting into the lucrative redevelopment market in Mumbai.

The Vikhroli model will isulate the compay from any downsides. They build huge towers instead of current factories which are leased to IT companies. They get huge rentals while the ownership remains with the Godrej group.

This is a safe low risk bet for those who want to take a bet on the real estate segment also.

One could also look at Larsen and Toubro, India's premium infrasturcture compay. if the economy has to revive, L&T will benefit.

Wish you a very Happy Diwali and enjoy your Mahurat trading.