Sunday, October 26, 2014

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.

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