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.
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.
thank you sir........
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