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.