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