2015: Crunch Year for Reforms

The markets have rallied in 2014 on hope. they have rallied about 30 pc on hopes of a new Government and good Governance. 2015 is the crunch year when the Government has to deliver on the promises made.

1. It is soon coming to crunch time for the Government. The Reforms have to be put in motion. The Union Budget is the first milestone which can be seen.

2. The Government has taken an ordinance route for key bills but they will have to be validated in the next Budget session. The Budget session starts in late February.

3. The markets are now at a key inflection point. They can continue rallying on hope till the budget or continue their correction and then if the budget is reform oriented then rally after the budget.

4. The FIIs have been net sellers the entire month of December. This has partly been due to global reasons. The US posted a GDP growth of 5 pc and the money is flowing towards the US. The Dollar is strengthening and the US equity markets are on a roll.

5. Technically, the markets should touch about 9000 once in the first half of the year.

6. After hitting the top of 8627, the markets corrected till 7961 a fall of about 666 points. Then the markets rallied till 8365 a gain of  404 points. If 1 more down leg is pending, then this could have targets of 7699 or  7300.

This is now a market which is a buy on dips markets. The area around 7700-8000 offers a very good buying opportunity.

Even the Gilts have gone back to a yield of about 8 pc which also gives another entry point into the Gilt funds.

Action Packed truncated week ahead

The markets hit a short term bottom at 7961 before retracing rapidly. The first round of fall may be over and now there would be some relief rallies. The coming week is truncated due to Christmas and has 2 events lined up. Let us see how the markets react to these events.

1. The markets closed flat for the week but that only tells part of the story. There was a dip of 3.2 pc in the early part of the week which was retraced in the latter part of the week. This could mean 1 leg of the fall is complete and we may see a flat to sideways markets for the rest of 2014 with a positive bias.

2. Targets on the upside come to 8294, 8373, 8451 and 8493. Only a decisive close above 8500 will tell us that this fall is over.

3. The Reform agenda has got stuck in Parliament and will be stuck if nothing happens in the next 2 days.

4. The FIIs have consistently sold in the last 8 trading sessions.The markets have not tanked completely because of DII support.

5. The crude oil prices continue to be around 60 dollars, the Russian Rouble has crashed from 30 to a dollar to about 60 to a dollar.

6. The G - Sec yields spiked up showing uncertainty and hesitancy about rate cuts.

7. On Tuesday, we have the results for Jharkhand and J&K. The BJP is expected to sweep Jharkhand but the same cannot be said of J&K. In case they perform well in both States, then the markets may rise.

8. On Wednesday is the F&O expiry. Owing to these 2 events, the markets may remain volatile.

The Strategy remains the same. Buy on dips only.

Short Term bottom may be in sight

The markets continued their correction and fell this week also. The markets fell about 3.7 pc to close at 8224 for the week. The correction has been ongoing for a couple of weeks from the high of 8627.

1. In this present bull market each rise has been about 900 points and correction about 450 points. If we apply that logic then we may be close to a short term bottom at about 8150-8180 area.

2. If the fall continues, then it would imply a larger correction, maybe a correction to entire 5933-8627 rise which could be around 1000 points correction.

3. It would be good to accumulate a few stocks at around 8150 area and keep sufficient funds to add more at lower levels.

4.The FIIs have been net sellers in the past week and hence the market has not got any support.

5. The Gilt funds have given an annual return of about 19 pc. The max return they have give over a period of 1 year is about 25 pc. This implies a gain of another 7-8 pc over current levels can be had.

6. The Parliament session has so far failed to pass any major bills. If the logjam continues it would be bad for the markets.

7. On Monday, the markets may witness a fall due to the poor IIP numbers and the US fall on Friday. It could be a good chance to pick up a few stocks.

Overall, slowly it is time to buy again on declines. watch the 8150-8180 region carefully. If it closes below these levels then we may see 7800 levels on the charts.

Time for caution at current levels

The RBI policy has come and gone. While the rates have not been cut, a hint of rate cut early next year has been made. The markets corrected slightly, but individual stocks continued rising. Let us see what next for the markets.

1. 1 of the key triggers for the markets, the interest rate cut has come and gone. The stocks, especially the banking stocks were rising on speculation of a rate cut. The Interest Rates on 10 year gilts has fallen to 7.93 pc which is a 16 month low.

2. The Parliament session has been in progress for almost 2 weeks and no major reform bill has been passed. 1 more trigger for the market has not materialized.

3. The FIIs will be on holidays after 2 weeks and the inflows may slow down. The markets towards the second half of December will be listless.

4. The crude oil prices have stabilized around 70 dollars a barrel. The Government has increased the excise duties on Petrol and Diesel. This will ensure that the fiscal deficit targets are met but at the same time, the citizens do not get the full benefit of crude oil price reduction.

5. Internationally, there are no major triggers for the markets right now.

6. It makes sense to book part profits and buy the stocks back when the markets correct.

Right now, it is the time to sit back and enjoy. Book part profits and wait for the markets to correct to resume buying again. markets have rallied from 7724 to 8627 a rise of almost 900 points. Usually the markets rally 900-1000 points before retracting 30 - 40 pc of the gains.

Crash in Crude Oil prices lead the markets higher

The markets again had a very good week, topped off by the fact that crude oil prices crashed on Friday on OPEC announcement of no cut in production. All eyes are on the RBI Governor on Tuesday.

1. The markets rallied 1.3 pc on the back of FII inflows. FIIs have pumped in nearly 11000 crores in the markets in the month of November.

2. The RBI meets on Tuesday and there may be some correction, if there is no cut in the Interest Rates.

3. The Parliament session has begun and the first week was not at all promising. If this trend continues, then that may be a reason for correction.

4. Now, is definitely not the time to add more shares but focus should be on part profit booking. The same shares can be bought back at lower prices as and when the correction comes.

5. The Gilt funds are continuing with their fantastic returns. If a rate cut does materialize then part profits can be booked there too.

6. Technically, the markets had a target between 8450-8650 for this up move. How the markets react from here will tell us if there is going to be a 100 points correction or a 300-400 points correction or whether the up move will continue to 9000.

The focus now should be purely on booking part profits. Now, is not the time to make fresh purchases. Markets always give an opportunity and they surely will give an opportunity to buy.

Surge before some correction

The markets continued with their moves higher and have moved into the resistance zone of 8450-8650. Even though the markets are moving higher, the Advance Decline ratio on many days is not very favorable. Let us see what moves the markets could make.

1. The markets are awaiting a RBI rate cut on December 2nd. If no rate cut then a correction could set in. If a rate cut happens then the markets would surge even further.

2. The Winter session of the Parliament begins on Monday and all eyes would be on what kind of bills the Government is able to pass through.

3. The FIIs were net sellers on Friday.The first time they have sold in the month of November.

4. The 10 year Gilt yields have come down to 8.17 %. In the next few months they are expected to come down to 7.75 %. A short term gain can be made by investing in Gilt funds.

5. With the rate cut announced by China and stimulus by ECB, global liquidity will remain good.

6. 8450-8650 are strong resistance zones for the markets. Looking at the rise from 7724, a target comes to around 8640.

Now, is the time to book profits for stocks bought earlier, lower the cost price and be ready to buy them back again at lower levels.

Markets Continue Making new Highs

The markets continued making new highs on the back of FII inflows, weak oil prices and low inflation. The markets look set for for 8450-8650 range in the coming weeks. Let us look at the developments of the last week.

1. The oil prices corrected further last week and the Government instead of reducing the prices very smartly increased the excise duty on petrol and diesel. What this will do is increase revenue by 6000 crores in the remaining months of this fiscal year. Also, tomorrow when the oil prices rise, the Government can shield the Indian public by rolling back the excise hike instead of increasing the prices.

2. The FII flows have continued unabated. the first 2 weeks of November have led to an inflow of about 7500 crores. As long as the money flows in, the markets will continue to rise.

3. The next major trigger for the markets will be the Winter session of the Parliament which begins from November 24th. The passage of key bills will set the tone for the markets.

4. The RBI policy is in early December and it remains to be seen if the RBI will cut interest rates.

5. Gilt funds have shown a smart rally and returned about 10-12 pc in the past 6 months.

6. Profit booking can be done at slightly higher levels. If the markets rise by another say 200 points on the Nifty this week, I would suggest partial booking of profits.

Everything looks hunky dory at the moment ad it is safe to book profits in the markets. remember the markets have risen from 7724, a rise of 691 points ad a breather may be round the corner.

Markets consolidate their gains

It was a truncated trading week with the markets open only for 3 trading sessions. The markets closed flat for the week but many stocks hit their all time highs. Let us explore what can happen next.

1. The Modi Government Cabinet expansion is a significant milestone. It inducts many new dynamic faces like Manohar Parrikar and lessens the workload on existing Ministers.

2. The Winter session commences on November 24th and all eyes will be on how the Government clears the pending legislation. This can influence the way the markets move.

3. With the Bank of Japan announcing stimulus, the easy liquidity continues. This will ensure the FII flows and the data for November has been positive so far from the FII inflows.

4. The crude oil prices continue to remain low thus helping the fiscal deficit.

5. The markets have given a technical breakout and the targets could be between 8450 - 8600. There could be a 10 pc decline either before the budget or after the budget.

6. At 8300+  levels, it does not make sense to create fresh positions but rather book partial profits so that the same funds could be re-invested at lower levels.

7. The Gilt 10 year yield has dropped to 8.21 pc. it could drop further depending on RBI action.

A 10 pc correction could be expected after we rally about 200 points higher. That dip would be a buying opportunity.
 

Breakout by the Markets

The Markets closed much above their all time highs on a weekly basis on back of stimulus by the Bank of Japan. The markets have given a breakout and should continue their momentum upwards for some time. the markets have a lot going in their favour at the moment.

1. The Diesel price cut brings diesel down by Rs 6.3 in past 10 days in Mumbai. That is almost a 10 pc cut and this will cool inflation down. This can result in a rate cut and Gilt funds are making merry with Interest Rates declining. Gilt funds make money when interest rates fall.

2. The Bank of Japan stimulus may lead to more money coming to India. close ties between Shinzo Abe and Narendra Modi, Softbank investments in Indian companies all point to more focus on India by the Japanese investment community.

3. The political winds blowing in favour of the BJP has already led to some bold economic decisions being taken. It looks like modi is walking the talk.

4. The FIIs bought almost Rs 3750 crores worth of shares in the last 3 trading days of October. If the  trend continues, the markets will continue to rise.

5. The Indices have moved to all time new highs and now the second line of stocks will start moving up. Minimum targets from the current levels of 8322 are 8450-8500.

6. At higher levels again part profits can be booked, remember the money taken out from the markets is money earned.

I expect the rally to continue for next 2-3 weeks at least till the Winter session of Parliament commencing on November 24th.

After that what happens in parliament will determine the course of events.

Markets at Key Cross Roads

It was a good Diwali truncated week for the markets. The markets gained 3 pc to reach 8014. From here, we are truly at crossroads. Let us explore what can influence the markets from here.

1. The reforms continued with the Coal Ordinance being announced. Coal is a key factor in powering India's thermal power plants and most of the plants are coal based. This will help all the power plants which are stuck up due to lack of coal.

2. The Defense logjam got a boost when the Government cleared deals worth 80000 crores. The Government in the span of 1 week has made 3 clear policy decisions on key areas like Diesel and Gas Pricing, Coal Mining and Defense Procurement.

3. There could be a correction of about 1000 points either now or after the budget. Corrections are always healthy and help in removing weak hands from the markets. The markets have corrected from 8180 to 7724 before bouncing back to 8014. Above 8100, one can be sure if  there is sustenance of 1 more move up to 8400-8500.

4. The weak crude prices go a long way in helping the Indian economy. Narendra Modi government in a way has the beginner's luck. Low crude prices is a big slice of luck and disinvestment of ONGC should be done now to raise funds.

5. The FIIs were net buyers this week and though growth is slowing down in US and Europe, India would remain the preferred buying destination.

6. 1 characteristic of this fall was that though many front line companies did not correct much, it was the stocks on the speculative side which lost out big time. This again goes to prove that it pays to stick to quality stocks.

The future of the stock markets now is in entirely hands of the Government. The Mandate has been won, Maharashtra and Haryana have been conquered, roadblocks been removed and it has been 5 months since the Modi Government has been sworn in.

All further gains would be dictated by reforms and Government action and nothing else.

Elections over: Reforms get a boost

It was an action packed weekend with lots of announcements of reforms coming in along with the election results. The path India travels down now has irrevocably been altered and we seem to be headed down the right direction.

1. Diesel price decontrol is a major step and a move in the right direction. The subsidy was leading to a drain on exchequer and Diesel guzzling SUVs and vehicles were cornering a large part of the subsidy. diesel and Petrol are ow out of the subsidy regime.

2. LPG connection holders getting direct credit of the amount irrespective of whether holding Aadhar or not is another way of plugging leakages. Next, would be reducing the cap on cylinders from 12 to the original 9 before Congress made a populist last minute move.

3. With subsidies being reduced, fiscal deficit gets reduced. The hike in domestic gas prices further will lead to an incentive for more gas exploration efforts and lead to lesser imports.

4. The BJP comprehensive victory in Haryana where they have gone to 47 seats in the assembly of 90 seats from 4 seats in last Vidhan Sabha shows the complete domination. Congress is now left with only the major states of Karnataka and Assam.

5. In Maharashtra, the BJP has won 124 seats. If they were in a pre-poll alliance with the Shiv Sea, the Sena was offering them only 117 seats and they would have ended with maximum 70-80 seats at the upper end of the range. the calculated risk has paid off.

6. In Maharashtra, it may be the beginning of the end of the regional parties.  The base for 2019 is being prepared.

7.  The markets should rally now and from now it would be all be on performance of the Modi Government. The Honeymoon period is over, the season for excuses is over and now it is time to deliver. The petroleum reforms announced yesterday were a step in the right direction.

8. The markets could correct 100-200 points but it is time  to start accumulating quality stocks.

For the BJP, it is time to celebrate. They took calculated risks which have paid off handsomely. For others, it is time to introspect.

Markets have started looking selectively attractive

The markets continued their correction this week and a few of the stocks have begun to look attractive. All eyes are now on the State Assembly results which will decide the course of the markets in the near future.

1. The FIIs have sold whole of October so far and their sell figures have been matched by DII buy figures. This has led to the markets not tanking.

2. The Global factors have turned weak and this is leading  to markets correcting.

3. If the BJP wins an outright majority on its own in Haryana and Maharashtra, the markets will rally else use it as a excuse to correct if the BJP is in a tight especially in Maharashtra then Modi's popularity will be questioned.

4. Brent crude has declined further leading to over=recovery in Diesel of more than 2 rupees. the fiscal Deficit definitely will be under control and this bodes well for the new government.

5. The Honeymoon period for the Modi Government is definitely nearing its end and mostly after Diwali, tough questions will begun to be asked.

6. Many of the stocks like Piramal Enterprises which had crossed 800 are now available at around 700 rupees.

7. The markets may have corrected only about 5 % but may good quality stocks have corrected much more. slowly, it is time to start nibbling at these stocks.

8. The markets can correct further till 7450 or 7600 or bounce from here. For long term investors, the buying opportunity is coming ad those willing to see their stocks temporarily go down can start thinking of accumulating.

H1 2014 Results the next trigger

In an extremely short trading week of only 3 days, the markets barely moved. Monday also is a trading holiday. There are no short term triggers for the market either up or down. Let us see what could unfold over the next few days.

1. The next week begins with a holiday and the H1 2014 results will trickle in only after next week. I expect next week to be another listless trading week.
2. The week starting 13th October is going to be a action packed week with H1 2014 results coming in and election results on October 19th 2014. The week after that is the Diwali week and if any pre-Diwali rally if it has to start has to start very soon.
3. Globally, crude oil prices have dipped and there is actually over-recovery of almost 2 rupees for diesel. This means thanks to model code of conduct the Government cannot cut diesel prices even the previous under-recovery is being covered. This bodes well for the fiscal deficit.
4. The robust car sales point to change in sentiment. As I see it as per the 8 year cycle, we should peak out between November 2015 to February 2016.
5.Gold prices continue to make fresh lows. This indicates a lack of fear in the world markets.
6. The FIIs bought about 5000 crores worth of shares in September and the Domestic funds picked up 16000 crores worth of shares. In spite of pumping in 21000 crores in the markets, they moved up only 0.1 pc for the entire month. This indicates fatigue at higher levels ad local operators booking out.

It is time to stay on the sidelines and watch the markets. At 7945, it does not make such sense to buy as well see. If one had to sell then the last 1 month presented much better opportunities than now.

FIIs turn Sellers

The markets closed down almost 2 pc for the week and a notable fact was that the FIIs turned sellers for almost every day of the week. Also, on Friday India received a ratings upgrade. Let us see the future course of the markets.

1. FIIs selling is a key factor. They are 1 of the most vital components that keep the markets. Typically, the Indian markets are dependent on FII money, Domestic funds out of which LIC is a key component and the Retail and the HNI component of the market.
The Domestic funds are mostly a defensive option as such they buy when FIIs sell, and markets bottoms can be identified when Domestic funds are net buyers for a couple of weeks to a month. The FIIs are the steroids on which the markets go up. the Retail and the HNIs are bit players in this whole game.

2. Now, with huge issues of divestment coming up, LIC will divert money out there and so will those FIIs betting on the long-term India story.

3. The markets are likely to consolidate in the next few weeks and months. the long-term picture remains intact. This would be a good opportunity to accumulate quality stocks rather than selling stocks at lower levels.

4. The markets closed at 7968 after testing 7841. The markets have already corrected about 4 pc from the top. It could happen that the markets test 7400 also.

5. Globally, usually the markets tend to be slow around this time of the year. It could happen that we correct now and set the stage for November to February rally.

6. The next 3 weeks also will see the Maharashtra elections happening. BJP has lost the edge in the elections and I see it extremely rare to see a BJP CM at the helm after the elections. It could still happen that there is a BJP CM but with a tie-up with NCP.

Now, is neither the time to buy or sell but to wait and watch. Buy around 7400-7500 or sell between 8200-8500.

 

Wait and Watch Continues

The markets gained 0.2 pc for the week but what was most impressive was the recovery after the Fed announcement of interest rates not rising for a considerable period of time. Let us see what has changed in the past week.

1. The options for the markets are making fresh highs and making a short term top between now and Diwali. This possibility gets confirmed on the break of previous top of 8181.
The second option is consolidating till the Haryana and Maharashtra elections results on October 19th and then correcting or making a top in euphoria.
The third one is that the top is already made and we are going to have a 10-20 pc bull market correction now.

2. The Maharashtra Alliance picture gets murkier by the day and everyone has been pushed to the brink. The last date for filing nominations is this Saturday and the picture will be clear by this weekend.

3. If everyone fights separately, it will be a free for all and post poll there could be a BJP NCP tie up as well.

4. The FII purchases have dipped during this past 1 week.

5. Gold continues to decline and should be avoided for the moment.

The best course of action right is keep part booking of profits and not to exit completely from any stock. If the markets go down add the same stocks back.
Finally, the money taken out from the markets is profits earned and not notional profits.

October 19th is the Date to watch

The markets continued to meander while the mid-caps kept up with their upward trajectory. The Election Commission has announced the dates for elections for Maharashtra and Haryana and also the dates for the counting of votes.

1. 15th October is the date when Maharashtra and Haryana goto polls and October 19th is the date when the Results will be out. with J&K polls likely to be postponed to ext year due to the floods, these become key elections.

2. Maharashtra has been under the rule of NCP - Congress for the past 15 years. with the political capital being lost in May, a setback for Congress here would strengthen the hands of BJP. At the same time if NCP Congress pull it off, then there would be a fightback against Modi Government and policies.

3. The FIIs continue to be buyers. Also, Disinvestment is planned in a big way in September October which could mute the rise of the markets.

4. The Markets should peak out between 8200-8500 sometime in the months of October and November.there could be a correction of 10-15 % from the top which would be a buying opportunity.

5. Many mid caps, at least the ones which I hold have doubled or tripled from the cost price. Such stocks it could time to book profits hold on to remainder and enjoy the dividends.

6. We could see some dip to 7900-8000 followed by a rise up towards Diwali. what is significant is the broader markets continue to move up.

7. Diesel prices may actually be cut this month followed by further reduction in Petrol prices. All this bodes well for car sales.August car sales rose on the back of Ganapati festival demand, whereas September and October would be driven by Diwali and Dassera.

Now would not be the time to add fresh stock positions but wait patiently to book profits and await for some correction to jump in.

Upmove continues; FII flows continue

The markets gained another 1.7 pc. The markets continue to make a steady upmove with minor corrections on the way. Let us see if  this week has brought any development in the current move.

1. The GDP numbers and auto car sales which were excellent aided the up move to new all time highs. markets are all about sentiments and sentiments continue to improve.

2. FII were huge buyers in the first week of September almost buying 5000 crores worth of shares. As long they continue buying, corrections would be short lived.

3. Another key development during the week was that under recovery on Diesel has come down to 8 paisa or almost disappeared. This means the Government burden of subsidies on Diesel and Petrol stand removed. This will help in meeting the fiscal deficit targets.

4. The next week surely will have the announcement of the election schedules in key States. Maharashtra is economically very important as the funding comes from Maharashtra.

5. Technically, the markets look to hit 8200-8400 before any significant correction. Another key feature of this rally is that the mid caps are now flying. As mentioned, its all about sentiment and I would not be surprised if we hit all time highs around Diwali before forming a short term top.

6. What does an Investor do now? Invest in quality Stocks which are not overpriced. else one may again get stuck with overpriced penny stocks as in every bull run.

Overall, its time to consolidate and look at part booking of profits., Finally money earned is not notional profits but the money taken home.

Incremental Gains Continue

The truncated week saw another 0.5 % gains despite of it being expiry week. The markets continue to make steady progress. Let us examine the parameters which will influence the markets.

1. FIIs continued to be net buyer everyday of last week. They have bought cumulative 7000 crores for the month of August alone.

2. The GDP numbers which came in on Friday at 5.7 % were way beyond expectations. I expect good car sale numbers keeping in mind Ganesh Chaturthi sales.

3. Modi visit to Japan and the warmth displayed by the Japanese Prime Minister bode well for the country. Japan is Asia's second largest economy and we are the Third largest. Japan invests significant amounts as aid for development. Japan is a key Strategic economic as well as Defence ally for India.

4. India is surrounded by China and Pakistan. It needs allies who need similar support and have similar concerns. Japan, Philippines, Vietnam all become natural allies. Any conflict is always decided by the Friends a country has.

5. The Election Commission is yet to announce date for elections so expect limited action till then.

6. Technically, Nifty is very bullish considering it is closig at all time closing highs.

Unless something major negative happens, I expect small upwards movements to continue. The ext major trigger will be the Assembly Elections in the 4 key States in October and November 2014.

Markets continue to Consolidate

The markets continued to consolidate up 1.6 pc. The markets moved up 2.5 pc for the month so far and the movement has been so quiet that no one has noticed. Let us see if anything has changed this week.

1. The FIIs continued to be net buyers for the entire week. This indicates that the flow of foreign money continues.

2. The markets closed at new monthly highs and much over the previous high of 7840 which is a very bullish sign.

3. The monsoons have stabilized and spread across the country. The poor monsoons, even though the deficit is still 19 pc seems to be receding in the past.

4. The markets have moved up but the individual stocks are still lagging behind. This could be a buying opportunity for selective stocks.

5. There seem to be no clouds on the horizons but a potential trigger could be the Assembly elections results in the 4 states Maharashtra, Jharkhand, J&K and Haryana. The results could be around the last week of November and that is the time when the markets take a decisive turn up or down.

So, now is the time to enjoy the festive seasons, buy good quality stocks on decline. 6400 is the long term support and 7450 is the immediate support.

Weekly Gains by the Market but....

The Markets gained 2.9 pc in the last week based on hope in the budget speech. There are some disconcerting signs in the market.

1. The markets are only 50 points away from the previous all time high but many of the mid caps are 20-30 pc down from the top. This is a disconcerting sign.

2. The FIIs continue to be net buyer albeit at a smaller rate. The DIIs have out bought the FIIs by 3:1 ratio.

3. Modi speech was the correct one but unfortunately not enough to enthuse those who are looking for a quick gain from the markets. At least 1 should have the patience to hold for the next 18 months.

4. There are have been critical turn dates sometime in July and middle of November, so depending on how the markets react we can get a 10-15 pc correction from the top.

5. The structure is in place for the next Bull Run, but the Government will go slow, first wait for the Assembly Elections in Maharashtra, Haryana and Jharkhand out of the way. The dates are supposed to be announced on August 20th and the model code of conduct will be in place anytime soon.

6. From the strategic long term point of view it makes sense to focus on Assembly elections, increase the tally in Rajya Sabha and then go for the big bang reforms.

Strategy remains the same, buy on dips good quality stocks which withstand the test of time and ot look at that them everyday or even every week. Businesses do not change everyday.

Correction: A Buying Opportunity

The markets continued the correction from the top. Week on week, the markets corrected 0.4 pc to close at 7569. The Long Term trend remains intact and this should be treated as a buying opportunity.

1. In every Bull market, corrections are normal and a correction of 10-15 pc from the top should be treated as normal and welcome.

2. The FIIs have sold about 1000 crores in August and the DIIs have bought above 1600 crores. Such phases are usually buying opportunities.

3. The monsoons have stabilized, the deviation from the Long Term Average has come down to -17 pc.

4. The markets have been driven down mostly on geopolitical tensions. As seen in last August, these are transient in nature. The bounce is sharp and does not give too much of a buying opportunity.

5. The Auto Sales have been robust now for the month of July. Auto Sales are early indicators of heightened economy activity and a change in sentiment.

6. The Economic cycles are always based on sentiment. The minute people start feeling confident and good about themselves, they start going out and buying. Buying leads to orders being placed and the cycle goes on. The trigger for the chage in sentiment was the election of the Modi Government.

7. Key elections in states of Maharashtra, Haryana, J&K are the next trigger. while the BJP is expected to do well in Maharashtra and Haryana, the proof of the pudding is in the results. An opinion poll gave the BJP-Shiv Sena combo a 2/3rd majority in Maharashtra. The results are key so that the BJP boosts its numbers in the Rajya Sabha and is not that dependent on regional parties to pass key bills.

The coming days and weeks will give good buying opportunities and one should stick to good highly robust stocks with strong and managements with integrity.

Feedback Time - Good, Bad and the Ugly

I have been posting for 5 years and 3 months. It has been a long a journey and the road has been long winding and highly enjoyable.

I have been in the markets for 16 years now, helped run an investing Sunday club where we used to meet on last Sundays of the month for 5 years, and been part of various online forums for 11 years now.

To quote Robert Frost:

Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.”

“These woods are lovely, dark and deep,
But I have promises to keep,
And miles to go before I sleep,
And miles to go before I sleep.” 

The journey has been highly exciting and helped me become a better Technical and Fundamental Analyst. It is time to take a pause and take a deep breath before commencing the next leg of the journey.

I need from each of you what has been Good, Bad and Ugly so that I can return as a better analyst.

It is time to step back and look at the Big Picture.

Please feel free to send your feedback at nish.stockid@gmail.com

Nifty Long Term Elliot Wave Counts

Today on a holiday, let us step back and look at the Long Term Elliot Wave picture. In the day to day and weekly hustle bustle, the big picture is often lost and it is only the big picture which counts and nothing else.

I tried to count the wave structure from the bottom made in October 2008 and re-tested in March 2009.

This post is dedicated to Ralph Elliot, the father of Elliot Waves (Born 28th July 1871)
http://en.wikipedia.org/wiki/Ralph_Nelson_Elliott

 

Wave 1 was from 2253 to 6338 constituting 4085 points and lasting from October 2008 to November 2010. It tested the previous top at 6358.

Wave 2 was down from 6338 to 4531 constituting 1807 points, about 44 pc of the previous rise. It lasted from November 2010 to December 2011.

Wave 3 started in December 2011 at 4531
Wave 3.1 UP 4531 - 6229 in May 2013 (1698 points)
Wave 3.2 DOWN 6229- 5118 in August 2013 (711 points - 42 pc retracement)
Wave 3.3.1 UP 5118 - 6415 in December 2013 (1297 points)
Wave 3.3.2 DOWN 6415 - 5933 in February 2014 (482 points - 37 pc retracement)
Wave 3.3.3 commenced in February 2014 and has targets of 7631, 8680 or 10378

Wave 3 has traversed about  1908 points from 5933. depending on where it ends, the broader targets for Nifty could be around 10400-12000 points.

Overall, the top should be made sometime around November 2015 - Feb 2016 period as per the famous 8 year cycle, where every 8 years a serious top is made.

The negation point for all this break of 6350, the previous multi year top.

Strategy for me is simple:
I have just bought and held the 10 stocks I shared with my friends as my core portfolio on June 30th.
I will take a call on liquidating them in November 2015, in the intermediate book profits and keep reducing cost of acquisition.

Elliot is not the holy grail of investing and should be used just as 1 of the aids for looking at the big picture.

Expiry week looms large

The markets gained 1.7 pc during the week to close at 7791. Next week is expiry and a truncated trading week to boot with a holiday on Tuesday.

1. The FII buying continues but with a slightly reduced buying intensity.

2. The monsoon has well and truly set in over the country and it may just be a case of delayed monsoon cycle where the entire cycle is pushed forward by 1 month.

3. The markets for this week have expiry and only 3 days to expiry. The markets would be bullishness above7841 and a range of +- 200 points can be expected over this week.

4. The fundamentals seem to be improving with sentiment sky rocketing.

5. Only warning sign for the BJP is the Uttarakhand by election results where the Congress swept all 3 seats including 1 seat held by the BJP for 20 years. This brings them closer to 35 seats and the Congress Government in Uttarakhand becomes safer. The longer term implications are that the BJP needs to be careful especially with elections in key states like J&K, Haryana, Maharashtra looming large in next 3 months.

6. Winning in these key States is essential so that the Rajya Sabha strength of the BJP increases.

How Modi handles the next 4 months will define his first term in office. Interesting times ahead.

Stay tuned for a special update on Nifty Long term Elliot Wave Charts on Tuesday morning.

Cues Turn Positive

The markets have digested the budget and had a rally of 2.7 pc. The Q1 results are in the process of being declared.Let us look at the key factors influencing the markets.

1. The monsoon worries have abated and it is raining in most part of the country. The deficit has gone down to -15 pc from -43 pc. We may have a deficient monsoon but definitely not a severe drought as feared.

2. The FIIs were net buyers to a tune of 2000 crores last week thus being the major drivers for the markets.

3. The IIP numbers have improved. There is a change in sentiment in the markets. The mood of the people is upbeat. Often, it is the change in sentiment which drives economic activity. If people feel optimistic about the future then they spend money and consumption drives growth. It is a cycle and we may just have hit the bottom in terms of sentiment in early 2014 and moving up.

4. Auto sales for the month of June were good. These are early indicators of economic activity picking up and trends for the next few months needs to be monitored.

5. Globally, the Iraqi situation has stabilized and Brent crude prices are down. The Government is losing just Rs 2.5 over diesel and if this trend continues by the end of the year, the subsidy on Diesel should end. Diesel and Petrol being subsidy free, who would have thought about 4 years ago, when Petrol was made free from the subsidy regime in June 2010.

6. The Nifty is at a critical level between 7650-700 and a close above these levels would indicate further upsides.

7. Projected targets could be range from 8100 to 8400 levels.

8. The Results of companies have been fairly good. Reliance beat expectations yesterday and so did TCS.

Time to stay invested and reap the benefits of long term investing.

Events out of the way. What next?

The last week was an action packed week with the Rail Budget, Economic Survey, Union Budget and Infosys results. The markets sold off on each event day thus fulfilling the adage “Buy on Rumors, Sell on News”. What has really changed in the past 1 week?
1. The Rail Budget met expectations. Most Rail Budgets announce lots of new Trains and there is no mention of how the funds are going to come in. 94 paisa out of every 1 rupee earned by the Railways goes in routine expenses like wage bills, maintenance. Nothing is left for the spend on Infrastructure. It makes sense to have fewer announcements and finish off existing projects.
2. The Union Budget was made within 45 days of coming to power. That is too short a time for any Government to make a meaningful impact.
The next budget is 7 months away and that is the real budget. The Budget announcement was a statement of intent and clarity on Retrospective tax, focus on infra spending are all positives.
The commitment to meet the fiscal targets and no major commitments being made on spending is heartening. The tax sops will improve sentiment amongst the middle class and the expansion of PPF limit to 1.5 Lakhs is most heartening. PPF is the most important form of saving for small investors like me and i would have welcomed if it had been raised to 2 lakhs also.
3. The Infosys results were average. The main show is yet to begin. The Attrition is good because the deadweight is being let go and time for a new Infosys to be built. Its price to earnings multiple is low compared to TCS and I expect Infosys to outperform its peers in terms of stock Price performance.
4. The Budget has come and gone and the monsoons have started to pick up at least in Mumbai. The negatives are getting out of the way and the time is to use every dip to buy good quality stocks.
I firmly believe such opportunities come once in a lifetime and we are sitting on the cusp of 1 such. I do not mind 500 -1000 points correction on the nifty as that gives us a chance to buy good quality stocks cheap.

Pre-Budget Rally commences

The markets gained 3.2 pc for the week and closed above the previous highs to close at a lifetime high. The pre-budget rally has well and truly begun and the time to part book profits is very well near.

1. The markets have begun to run up and they need to take a pause somewhere before the next serious up move. Budget day becomes very critical as I dont see any correction before the budget now. The Rail Budget on Tuesday will be a pointer to the Union Budget.

2. The Union Budget will be high on reform announcements and could lead to an upward burst. Overall we are now in a secular bull market which i see continuing at least for the next 14-16 months. The 8 year cycle points to a top around early 2016 late 2015.

3. The FIIs in the last week have bought about 60 pc of what they had bought totally in the month of June.

4. The Iraqi crisis seems to be easing a bit. 1 co-relation is that a bull run in equities coincides with a bull run in Oil.

5. The monsoons have arrived in Mumbai, there would be poor monsoons but the impact remains to be seen. The handling of the Iraqi crisis has already earned the Modi Government credit and good will in Kerala and the rest of the country.

6. I expect some big bang announcements in the budget signalling the intent of the Government. Budget is meant to signal the intent and the implementation would be next 16-18 months.

7. This rally has legs to go and targets of 12000-15000 Nifty do not seem unrealistic. in fact, I see similarities between June 2006 and now when the markets almost doubled. In June 2006, the Nifty was 3128 and peaked at 6357 in early Jan 2008.

Now, is the time to build a portfolio of good stocks and remain invested. Use short term peaks  to book profits as we do not know when the eventual top will come.

Buy the Dip Continues

The markets ended flat for the week. The markets are consolidating at support levels waiting for cues from the Union Budget which is just about 10 days away. Let us explore what could happen in the near future.

1. The Union Budget is 10 days away and the countdown has begun. I expect a budget which is reform oriented, signalling further its intent with a lot of push on Infrastructure. I do not expect the tax slabs to be rejigged more but the exemption for investing in PPF under section 80 could see an upward revision.

2. The Rail budget will give a clue what is coming. The fare hike has been identified and now the Budget should have Infra announcements. The markets could start rallying around the time of rail budget or even earlier.

. The FIIs are taking a cautious stand and the markets are not falling much. This means that the domestic players have jumped in to absorb the mild selling.

4. The monsoons are delayed and while they will catch up in terms of the quantity of rainfall, the distribution in terms of time will take a hit. This will impact agriculture growth. In 2009, we had poor monsoons, the markets had rallied on the UPA victory. The markets had corrected about 13 pc from the top. This time we have corrected about 6 pc from the top. We could either correct to 6700 or 7200 levels.

This would be the buying opportunity, the last chance to get in and watch the fruits grow. as per the 8 year rule, the markets should peak sometime in early 2016. We are about 18 months away from it and I expect a blow out rally to take place.

I have designed a Rising Sun - Top 10 Stock Picks for my friends. Those interested may please write to me at: nish.stockid@gmail.com

Buy the dip

The markets corrected around 0.4 pc to close at 7511. It was a range bound market with markets making a lower top at 7663. What next in the expiry week?

1. The FIIs have sold in the last week for 3 days out of 5. Small quantities but the buying support has gone.

2. The Monsoon seems to have slowed down. It will be a delayed monsoon for sure now, the rainfall quatity may not change but the timing will affect sowing.

3. The rail fare hike will most likely ensure a gap up on Monday. The medicine may be bitter but if the Indian economy has to improve, bitter medicine has to be taken. Please read my guest piece on Subhankar blog next week for detailed analysis on Subsidy Raj.

4. Iraq situation has raised brent crude prices. Past experiences show that such shocks subside suddenly. Syria when markets a low of 5118 is 1 example.

5. The supports are holding, which means expect a breakout ay time.

6. Next week is expiry, so the real game begins after Tuesday and Wednesday.

7. It is time to buy the dip. Accumulate quality stocks. The Modi era has begun on the right foot and if the same continues, just buy stocks and forget for next 5 years.

8. Key Indicators to watch:

a. The Budget will give the signals on the road map of the Government.

b. Further reduction of subsidies bode well in the long term.

Everyone is waiting for the budget. So, expect either a pre-budget or post-budget rally. 8100 is coming, before or after the Budget I do not know. Before hitting 7200 or straightaway I do not know. But, in the next 1 year we will surely hit both these points at least once.

Bold and welcome move by the Government

The Rail fares have been hiked by the Government, passenger by 14 pc and Freight fares by 6.5 pc. This move is most welcome and a pre-cursor to Acche Din.

Freight fares cross subsidize passenger fares. The passenger fares have rarely been hiked in the past 10 years of the UPA. The subsidy burden was dragging the railways down.

Since, freight fares have been hiked marginally compared to the passenger fares, impact on inflation will be lesser.

My prediction:
Expect the budget to have Infrastructure announcements for the Railways.

A good beginning has been made by the Government. No pain no gain. Next in line will be kerosene subsidy. Diesel subsidy is almost at an end, Petrol has no subsidy, question remains of LPG. Next move coming would be to go back to 9 cylinders or even 6 per year and eventually do away with the subsidies.

The money saved can be invested into Inffrastructure and that will automatically increase producvity. The Mumbai Pune expressway is the prime example of this. It takes almost just over 2 hours from Navi Mumbai to Hinjewadi where the IT hub is. Paying 400 toll, one can leave in the morning, go to Hinjewadi and be back in the evening.

Earlier it used to take 4 hours 1 way from Mumbai to Pune. Nitin Gadkari is the man who conceptualized the much ridiculed 45 flyovers i Mumbai and Mumbai Pune expressway. Roads will be the focus in next 5 years.

If this continues, Congress can expect to be out of power for next 10-15 years minimum.

Markets take a pause

The markets after having run up on expectations took a pause this week. Correcting about 0.5pc, The Nifty was hardly a representation of the true picture with many of the mid caps showing larger correction. What is next in store?

1. The FIIs were sellers only on Wednesday. they bought 1100 crores on Friday and buyers during the rest of the week too. This means the flow inflow contiues.

2. Iraq was run over in some parts of the country by rebels. This led to Oil spiking and markets correcting. Even more interestingly, Iran is willing to support Iraqi troops with own troops under US guidance. This is an event which is unbelievable but if this axis comes true expect crude oil prices to collapse in the long term.. This is perfect Game Theory scenario where each party has no choice but to co-operate to survive.

3. Iraqi effect on markets usually will be a short term flash in the pan event. I have noticed in the past such International flare ups quickly lose their impact o markets like Ukraine Russia or the Syrian crisis.

4. The Modi Goverment has realised the ecoomy is in worse shape than initially believed to be. It is like the treasury has been looted for 10 years ad empty coffers left. This will call for some tough measures in the form of subsidies beig reduced.

5. Modi brings his own luck and if Iraqi crisis fades soon  then diesel subsidy the largest of the lot amongst Diesel, Petrol and Kerosene will fade on its own.

6. The Budget is in the middle of July and soon, especially after this expiry is done with we can expect a pre-Budget rally on hope.Hope is the biggest thing in which markets rally on.

7. The markets has supports at 7489, 7400 and deeper down at 7223.

It is a buy on dips markets and we may be getting 1 more opportunity to buy the dip.

Markets set for new highs, after maybe a pause

The Markets took off on Friday on the back of Oil and Gas sector stocks. with lots of news swirling around, the markets ended the week about 4.9 pc higher. What next for the markets then?

1. The Feel Good factor is at play. The Honeymoon period of the Modi Sarkar is in full play and I expect after some more consolidation, the rally to continue till the Budget announcement in mid July.

2. The Oil and Gas stocks were in focus. Policy reforms are expected and diesel also is almost de-regulated. The under-recovery is down to rs 2.80 and with the rupee strengthening and monthly hikes of 50 p, I expect the entire subsidy to be wiped out in next 2-3 months.

3. No subsidy on Diesel and Petrol, that leaves us only with LPG and kerosene. The Oil Marketing companies are set to rally on this.

4. The target for the Nifty could be 8100 by the time of the Budget presentation. The correction of the move from 6638 to 7564 seems to have ended at 7216.

5. The Rally is absolutely broad based now, and one must clean up the portfolio with dud stocks right now.

6. Those who invested in Gilt funds have a reason to smile, as the yields have fallen from 9.10 pc to 8.52 pc With the RBI signalling further easing, expect Gilt funds to do well.

7. The FIIs have been massive buyers during this week and one can expect this trend to continue.

8. The Monsoons have hit Kerala and that is a relief.

Looks like "Acche Din" have arrived at least for the Equity markets.

Opportunity to Buy Stocks

The market has gone into a Consolidation mode and now is a good time to add fresh stock positions. After the last elections in 2009, the top hit by the market 2 days after the elections was the top for 3-4 months. A similar story might be playing out, already 2 weeks have gone by.

1. The Markets ended May with a gain of 8 pc. June has historically been usually a positive to neutral month overall.

2. The Budget would be around 10-15th July, so one can expect the pre-budget rally to start in the 3rd week of June.

3. The RBI Policy on 3rd June will give direction to the markets. An unexpected rate cut may lead to the markets galloping ahead.

4. PSU stocks would be a theme under the Modi Government. PSU Banks especially mid-sized Banks with good dividend yields are a safe bet right now.

5. Most of the uncertainities which plagued the markets have disappeared and looks like good days are here for the markets again.

6. Gold has fallen into an abyss and I feel the golde days are behind for Gold at least for the next few years. gold does well whe there is fear in the markets. Right now, fear has vanished from the global markets.

7. The FIIs invested a huge amount in buying part of Kotak Promoter stake and also QIP of Yes Bank on Friday. They pumped in almost 14000 crores for the month of May.

All the factors are in place for a bull run. It is a buy on dips markets right now.

Broad based rally in the markets

The markets gained 2.3 pc for the week. this was not the real story, it was the action in the mid caps and small caps which was where the real action took place. Let us now look at the possibilities ahead.

1. There seems unlikely to be a real correction now in the markets, it has become a buy on dips markets. The FIIs were sellers for 3 days in the markets, but they made up for it on Friday.

2. Above 7400 and 7477, we are headed to new highs in the markets. This is a good time to remove all dead stocks from the portfolio and move into quality stocks.

3. The next week, markets will cheer the Cabinet formation and the next significant event will be the Union Budget in mid July. Unless, the monsoons are a total washout, they will not affect the markets.

4. Infrastructure, Power, roads are the themes which can be looked on.There are several reasons for it. this is likely to be the thrust of the new Government and also these stocks have been badly beaten down.

5. All corrections from hereon are buying opportunities. The market has changed from sell on rises market to a buy on dips market.

6. Gold prices have come down on import relaxation. Gold as an investment class should not be a option now. Gold works when there is fear in the world and uncertainty is there.

7. One must book profits at regular intervals, else when the crash comes, all is lost. The profit can be locked in fixed income or real estate.

Markets need some cooling off before next up move

The votes are counted, the voters have made their statement and a new government will be sworn in soon. Let us see what we can expect from the markets.

1. It is clearly a buy on dips markets after a multi-year breakout from 6350-6400 levels. This will serve as a deep stop loss.

2. The famous 8 year cycle is due in early 2016. The next 18 months can see markets hit new and record highs.

3. This up move started from 5118 in August last year. The first wave was 6415 - 5118 = 1297 points.
 Wave 2 corrected from 6415 to 5933, a loss of  482 points. wave 1 took 3.5 months and wave 2 took 3 months.

4. Wave 3 started from 5933 and wave 3.1 ended at 6870 or 6819 a gain of 937 points and took a time of 2.5 months.
Wave 3.2 took about a months time and ended at 6639.

Wave 3.1 = 886 points so wave 3.3 = 7525 already done or 8072 or 8958 which should be hit in the august to October time frame.

The current correction can take us to 7100 or 7000.

Now is a good time to book some profits as if the projections go wrong one would be left with nothing in hand.
After some more spikes. I expect a consolidation for about a month before the monsoon and the Budget expectations kick in.

Modi wins: Profit Booking sets in

Finally, after all drama the votes have been counted and the BJP has come to power on its own.Today also the FIIs were big buyers and DIIs marginal sellers. Profit booking kicked in around 2 pm and lets look at the road ahead.

1. The Technicals I will visit on Sunday. Looking at the fundamentals, its the best possible result. BJP has a majority on its own and with allies close to 340.

2. The next trigger for the markets is the cabinet formation which will take about 4-5 days. The choice of Ministers, especially the Finance minister will set the stage for the next up move.

3. Post the Cabinet formation, the next trigger is the Monsoon followed by the Union Budget.

4. There will be a series of Assembly elections in key states like Maharashtra, Delhi, Bihar around Diwali. That will be a trigger down the year.

5. Over the weekend, many FIIs will re-evaluate their India allocation and that could be a trigger in the next week, especially on Monday.

6. The markets have got what they wanted, a clear decisive mandate for 1 party. Now, the next moves will depend on the party and their policies. As per 8 year cycle, we may have a dream run peaking in 2016. All dips, can be bought into.

I wonder if it was the retail who sold today? FIIs bought big. DIIs sold 10 pc of the volume FIIs sold.

At the present moment, it is prudent to book part profits in stocks bought between 5933-6600. One can always re-enter at lower levels.

All set for D-Day: Likely Scenarios

After months and days of speculation, the D-Day is approaching next Friday and let us look at what could be the various scenarios at play here. The rally before the Results does put question mark over the post 16th May scenario.

1. If Modi wins we rally another 5-10 pc. That would be the time to definitely book profits.If you look at 2009, a top was made in next 2 days after the results and then about a 10 pc correction set in. Next 4-5 months, we moved around 4500 which was hit 2 days after the results.

2. If there is uncertainty in forming the Government and if a compromise candidate within the BJP has to be found out then the markets would correct a bit. If there is a hung Parliament, then expect a 15 pc quick correction to take us to 6000-6300 levels.

3. The markets have begun a fresh leg of rally. The first major leg was 5118 to 6340, a rally of 1222 points. This leg began at 5933 giving targets of 7155 or 7910. Now, the tricky part is that if we reach 7155 or there about before the results what next?

4. It could very well happen that the next week may have a significant top in place.

5. As per Elliot, we are on the cusp of 3rd of 3rd wave which is the most powerful wave and will have several strong gap ups in place.

I would post an update on Thursday and Friday based on the prevailing trend which would give us an idea what to expect post the election results.

May - a month of big moves

Historically, the month of May leads to huge moves in the markets. April, as predicted turned out to be a range bound flat month. let us see how May has affected the stock markets.

1. In all election results month of May has lead to huge moves, May 2004 - minus 17.4 pc, May 2006 - minus 13.7 pc, May 2009 plus 28.4 pc.

2. The preceding April 2004 was 1.4 pc, April 2006 was 4.6 pc and April 2009 was 15 pc gain. April 2014 was flat with 0 pc gain.

3. The average high low pct for May is 7 pc above and below April close which gives a range of 6227 - 7124 range for the markets. If we correct before the Results, chances are we may see a rally after the elections.

4. The May low has always been at least 1 pc below April close. So, we should re visit 6600-6650 once before any up move.

5. The present correction is an opportunity to add more stocks as long as the markets remain above 6350. The may high has always been 3-4 pc above the April close usually and hence we should be making 1 more new high in the month of May.

Range Breakout likely

It was another flat week for the markets. The markets have gained a mere 6 points on the Nifty since April 11th on a closing basis. The range bound trading will lead to a breakout or a breakdown in the coming week.

1. The coming week is another truncated week of trading with may 1st being a holiday.

2. The markets seem to be stalling in the 6800-6850 band of trading. since, 6350 is a multi year breakout, the markets will be positive till they hold this area.

3. The FII buying continues but at a much reduced pace. The corporate results are also in and there are no major triggers till the election results.

4. April was predicted to be a range bound month and it has proved to be so.

5. The supports remain the same as mentioned last week, 6610, 6480, 6380 and the markets will be firm sustaining above 6819. This week, the markets could not sustain fresh highs and therefore tanked towards the end of the week.

6. Nothing much is happening in the markets and it is time to be patient waiting for the results of the elections.

7. If a poor monsoon materialized, the sugar stocks could be in focus. my favorite is KCP sugar trading around Rs 19 and giving a dividend of 70 paise. This has been a regular dividend paying company for past several years.

The trick would be to focus on strong dividend paying companies, so that you can hold on, if the markets tank post the results. Live on the dividends and average out the stocks at lower prices.

Truncated Week brings a flat market

It was a short trading week with the markets being in the negative for the first 2 days and making up the losses on Thursday. The highlight of the week were the IT Results.

1. The IT companies posted pretty decent set of results lead by TCS. This lead to a spurt in the IT stocks and the markets. As mentioned earlier, the IT stocks can act as a hedge for a BJP defeat.

2. The FIIs were net sellers on Tuesday ad Wednesday and were buyers on Thursday. The pace of flows has slowed down. In April, they have bought only 4000 crores so far as compared to 25000 crores in March.

3. Reliance results after markets hours on Thursday were ok meeting expectations.With a 3 year perspective, RIl becomes a buy now.

4. Next week is a truncated week with expiry on Wednesday and Thursday being a election holiday. The supports mentioned last week stand and are 6610, 6480 and 6376. If the market crosses and sustains 6819, then we may see new highs.

5. I have worked out certain post poll scenarios, which I would publish on Wednesday.

Net-net, no change from last week, buy on dips and wait for May 16th continues.

Range Bound Market in the first 2 weeks of April

The markets have gained 1.1 pc for the first 2 weeks of April. The broader market is catching up and the front line stocks are taking a short breather.

1. After a blockbuster rally in March, April was supposed to be a range bound market and so far it has played true to form. In March, the FIIs bought almost 26000 crores worth of stocks and in April the figure has been only 3500 crores with the FIIs having sold stocks on Friday worth 362 crores.

2. The markets have crossed the multi year top of 6350 and sustained above it now for 6 weeks. This now becomes a major support and the market should test this support once before May 16th.

3. The targets for the correction remain 6610, 6480 and 6376.

4. Infosys results are on April 15th and will be keenly watched. Markets tend to correct around the Results season and lets watch out for that.

5. Next week, the markets trades for only 3 trading days. the likely range at the beginning of the month was stated to be 6400-6900. we have tested 6819 and now maybe the time to test 6500-6550.

6. The Gilt fund yields have cooled down a bit to 8.95 % and the Gilt funds may give a good return if the interest rate cycle dips.

We are in a bull phase now and every dip is a buying opportunity to be either hedged at the time of election results with puts or part profit booking.

Buy on dips Strategy continues

The markets closed absolutely flat for the week and the FIIs continued to buy. The markets displayed some very strange behaviour this week but which also implies bullishness.

1. The markets took a dip towards the end of the week. Logically, the Puts should have shown an increase in value where in fact they lost money. The markets corrected 80-90 points from the top and the Puts lost money. I am seeing it for the first time in my life except for event related days.

2.April is a slow month as there are 4 trading holidays.

3. The opinion polls are predicting BJP win which will ensure that markets remain buoyant till the elections results are out.

4. The yields have again shot up, good time to add Gilt funds.

5. Targets for this correction could be 6578, 6456 and 6355. Beyond this I do not see the markets correcting further before the elections.

6. In Diwali Picks I had recommended Godrej Properties at Rs 370 post split at Rs 185 it is now at Rs 225 and Larsen at around 1000 which is now around rs 1300.

Larsen is a good proxy for the markets. If the markets move up then Larsen has to go up.

April seems to be a leisurely month. Buy on dips and wait for the election results.

How have the markets fared in April historically?

March seems to be a very positive month with the markets already gaining almost 7 pc. We are in uncharted territory now, and let us look at how the markets usually behave in April.

1. We have had a rally from 5933 to 6703 almost a rally of 770 points. A breather of 300-400 points is necessary to begin the next move up.

2. Out of last 13 years, April has been negative 6 times which does not say much. Every year, the low has always been at least 3-4 pc compared to March closing which means 1 visit to 6400-6450 zone is likely.

3. Also, the high has always been 1-2 pc higher than March close. So, either at beginning of the month or end of month we will see the markets going to 6750-6800 levels.

4. When March is positive, then April also generally tends to be a net net positive month. April is also a month where there is no substantial downside or upside so a range bound month is likely ahead.

5. The likely range comes to 6400 to 6900.

If we look at the Elliot waves, then some kind of wave seems to be coming to a close from 5933 to 67xx. since, we are in a bull market the correction should bring the market to 6521, 6408 or 6320. I do not see the markets going below these levels in the month of April.

Strategy for the elections:
Looking at the markets at new highs, and breaking the log term resistance of 6358, best is to buy on dips and hence portfolio with Puts nearer to counting day.

Markets continue their consolidation

After a rally of 4 pc in the first week of March, the markets continued to consolidate around the 6500 mark for 1 more week. The markets are taking a breather after a move to new lifetime highs.

1. The Government mopped up almost 10000 crores through the sale of ETF in PSUs and the Axis Bank stake sale. This sucked out some of the liquidity from the markets.

2. The Opinion Polls continue to put the BJP ahead and this is what is keeping the markets up. The capital Goods and the Infrastructure space is coming into the picture slowly.

3. The markets hit a bottom on the 4th of Feb 2014 and then have been on a up move for about 32 sessions. April may well be a month of correction after a up move of about 650 points in 32 sessions.

4. If the markets correct, they would be correcting the move from 5933 to 6575. targets on the downside would be 6424, 6330, 6254 and 6179. Considering that the markets are so bullish, we may not go down below 6330. Also, the 6350 have been the previous top many times and would now act as a solid support.

5. There are select stocks which are still available at good valuations. Godrej Properties, L&T finance, Sunil Hitech are a few which come to mind, where the risk reward ratio is favorable.

6. The next triggers for the markets will be the full year Results after the 10th of April. Till then, in the absence of major triggers the markets may keep drifting aimlessly. also, around 7-10th April, the last round of Opinion Polls will hit the wires before the freeze comes into the picture at the time of elections.

The next week may see the markets being held up to dress up the NAVs of Mutual funds as the year bonuses are dependent on them. I expect the early part of ext week to continue the buoyancy in the markets.

FIIs continue to Buy

It was a week of consolidation for the markets and they had a minor correction to close the week about 0.3 pc down. The coming week is a truncated week with Monday being a holiday for Holi.

There are several key points to focus on:

1. The FIIs continue to buy. As a result, the rupee is strengthening and hence the export oriented IT and Pharma stocks are correcting. also, people are booking profits in these sectors and moving the money to beaten down stocks.

2. The economic data is coming in good as far as inflation is expected ad hence the Banking stocks will continue to rise as the probability of a rate hike in April recedes.

3. The Opinion Polls continue to point to a BJP victory. so, till the election results are out there will not be any major correction, some minor dips which will be bought.

4. Preparing for the worst case scenario, one can get rid of dud stocks in the portfolio right now and focus on high quality stocks. If there is a Hung Parliament, expect the markets to remain down for 1-2 years.

5. Technically, right now a correction can be expected to 6350-6400, the rectangle from which the breakout happened.

There can be 2 scenarios right now, we immediately correct to 6350-6375 or first rally to new highs and the correct.

The fresh up move from 5933 is nearing maturity now. Post this, we will have the correction to this entire up move.

Then if the wave counts are correct, post the Results there could be another blockbuster rally.  What the pre-election rally has done is that it has give people a chance to exit their positions at least once and book profits.

Will the markets sustain the new highs?

It was a stellar week for the markets gaining around 4 pc to close at new all-time highs. The rally was on the back of FII flows anticipating a Narendra Modi led NDA victory. The rally also leads to a few troubling questions. Let us try and answer them.

1. The rally has been led on the back of FII flows of 2500 crores in the first week of March. This is almost same as what they had put in the month of Feb'2014.

2. Now let us look at 2 scenarios post the election results and markets being at 6500-6800 at that time.

a. Narendra Modi wins.

The victory will already been have factored in and what is left on the table for the markets to rise further? A few 100 points further being turning back?

b. Third Front comes to power

If this happens, we will definitely see a down circuit or two. The dust to settle will take a couple of years during which times we will re-enter a bear market.

In both situations, a rise for the markets right now is very dangerous and speculative. Opinion polls do not have a spectacular track record and have a tendency to fail. they usually only point to a trend not absolute numbers.

The current assumption is based on BJP doing spectacularly well in UP and Bihar with seats going from 12 to 50 in UP and to 16 to 30 in Bihar.

Elliot wise,

As per Elliot, we had stated,

A rough labeling of the waves from 5118 can be as follows:

1. 5118 - 6142 (1024 points)
2. 6142 - 5700 (442 points)
3. 5700 - 6415 (715 points)
4. 6415 and on going was the earlier hyopthesis.

Now, the 4th wave ended at 5933 and the last wave up is in progress.

It has potential targets of 6648 and 6957. This would also imply that the rally would exhaust within 3-8 weeks.

We are already 4 weeks from the lows and the rally could terminate within the next 1 month or so. It would make sense to take some money off the table and sit in cash.

The markets have always give chances  to buy whether it was Dec'11,Aug'12, Apr'13, Aug'13. Patience pays.

April-May'14 may just provide a similar buying opportunity.

How have the Markets historically fared in March?

The month of February is behind us. The range arrived at statistically was between 5850 - 6300 and the markets played true to form by being in the range from 5933-6282. Let us see how the month of March behaves historically.

1. It is the last month of the financial year and has given negative returns 8 out of past 13 year,. when the month of Feb has been positive like for this year, the returns have been negative 5 out of 7 times.Only in 2006 we have seen a massive rally in the month of March.

2. In 10 out of 13 years, the March low has been below the Feb close. This seems likely this year too since the markets have closed at the monthly high point.

3. The average gain for the month of March has been -2.2 pc, also march is susceptible to huge swings from 10 pc loss to 10 pc gain. This gives us a range of  5640 - 6903.

4. Average low below feb close is around 4.5 % which gives us a target of 5994 on the downside. average high has been around 5 % which gives us 6590.

So now we have the broader range between 5640 - 6903 and within this range between 5994 - 6590