Sunday, January 26, 2014

Correction sets in, RBI policy to set the tone

The markets formed a Doji last week signalling indecisiveness. The markets corrected on Friday giving up all the gains of the previous week. The RBI policy is key on Tuesday to see if the rates will be hiked. The markets are just meandering waiting for a trigger.

1. The FIIs have not bought big time in January and that may be the reason for the markets not making a very big up move.

2. With the tightening of liquidity, with the QE tapering, all emerging markets currencies are weakening. India has not weakened as much as the other currencies.

3. The Q3 Results are out of the way and that is 1 more trigger less for the markets.

4. The opinion polls are suggesting a BJP victory in May. I will post a more detailed write up on how to play the elections on Wednesday.

5. If we look at the Technicals, 6130 is a strong support and till we break it, it is just a minor correction.

I had said last week,

"6130 - 6358 and beyond this 5900 and 6420 are the key breakout points to watch out for."

This statement holds true. We touched 6358 and came back within the range. The markets will continue meandering in this range unless we get some meaningful triggers.

The RBI policy may give a short term move. It all depends on whether the lower fiscal deficit will encourage the RBI Governor to hike rates to tame inflation especially when the growth forecast has improved.

Sunday, January 19, 2014

Good Results, Lower Inflation lend a support to the Markets

The Q3 results so far have been average to good and the markets have not reacted adversely to the Results. In the week gone by the markets have gained 1.5 pc to close higher. Over the past few weeks, a few fundamentals have changed to support the markets. Let us take a look at them.

1. A key takeaway of the results is the superb performance by the IT sector and average performance by the Banks.

2. Inflation has fallen due to lower food prices and becuase of that there may be no rate hike in the January RBI policy. As a result of which bond yields have come down 8.62 % for the 10 year G-Sec.

3. The Gilt funds have give a good rise in the past few weeks. A lower interest rate regime also means that this is the last option to lock into tax free bonds.

4. Politics now remains the only major uncertainty for the markets. The Government is looking to borrow less this fiscal ad the rupee has stabilized in the 61-62 range.

5. All this implies that the markets will continue to meander in the 6130 - 6350 range as seen last week also. unless we have a major breakout or breakdown this range will continue.

6. 6130 - 6358 and beyond this 5900 and 6420 are the key breakout points to watch out for.

7. The markets may continue to drift in the absence of major triggers. The US Jobs data was poor which also implies that the taper will be at a slower pace giving support to the emerging markets.

8. The FIIs have continued to support the markets albeit at a lesser pace with purchases of 1874 crores so far.

In a nutshell, it is basically wait and watch and add quality stocks at declines. I feel we may still get a small buying window before a final rally.

Sunday, January 12, 2014

Good Infy results fail to cheer the markets

The markets were down 0.6 pc for the week. Infosys Results were good, the stock went up and the markets corrected in the second half. Let us see what can drive the markets in the coming week.

1. Infy seems to be getting its groove back with Narayanamurthy back. They look to be at the upper end of the guidance for the full year which is a good news.

2. In the month of Jan, The FIIs have been net sellers for 3 days and interestingly the DIIs have become net buyers. The FIIs have purchased only 271 crores worth of shares so far and the DIIs have purchased about 3500 crores worth of equity.

3. The Technicals remain unchanged from last week and I expect 1 dip before a rally towards 6500-6800.

4. The political scene is fast changing and what seemed like a wave in favor of Narendra Modi is fast fizzling out. If the current trend continues we may be in for a hung Parliament and markets will tank in May.

5. The focus of the markets will now be on Q3 results. we seem to have got off to a good start, we need to see how the next set of results are.

6. The corrections have been shallow and the markets are building a base before the next up move. The year has not begun on a very good note.

7. The trade deficit has improved thanks to the curbs on Gold and Silver imports.

8. The RBI policy may not hike rates as the IIP data was poor.

All in all the markets have still not got out of the holiday mood and till they break out of the 6130 - 6358 range expect the markets to be range bound.

Sunday, January 5, 2014

Markets wait for Triggers

This week the markets went down by 1.6 pc on the basis of rumors of the PM resigning and also due to the Technical factors. The inactivity in the markets will soon come to an end with the Fund Managers returning from vacations and also with the Results season kicking in.

Lets look at the market from Technical Factors first:

1.  The markets have fallen from 6415, the high made on the day after the election results. The markets had corrected to 6130. The markets then retraced 80 pc of the fall to reach 6358. Now, technically this fit in well. The next leg down can go up to 6073 to achieve equality with the previous fall or can go down till 5896.

2. Now, the previous fall in November was from 6342 to 5972 a net fall of 372 points. In this case, if we go below 6045, then this will become a larger fall then the previous fall and will point to a deeper a correction.

3. 6050 becomes a solid support for now and any fall till that level will only be a correction.

4. A rough labelling 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

Now, a logical end to this wave would be at 6141, 6057, 5973 or 5843 which matches with our figures in point 1.


1. Fundamentally, there is not much change. The Q3 Results will drive the markets sentiments. RBI policy in mid Jan will tell us if there are going to be any further rate hikes.

2. The CAD has almost reached 94 % of the target in the first 8 months. The Finance Minister is still confident of meeting the target. Let us see how he manages to do that.

Overall, I feel after a dip, there will be 1 final euphoric rally which will take us to new all time highs.