Sunday, November 30, 2014

Crash in Crude Oil prices lead the markets higher

The markets again had a very good week, topped off by the fact that crude oil prices crashed on Friday on OPEC announcement of no cut in production. All eyes are on the RBI Governor on Tuesday.

1. The markets rallied 1.3 pc on the back of FII inflows. FIIs have pumped in nearly 11000 crores in the markets in the month of November.

2. The RBI meets on Tuesday and there may be some correction, if there is no cut in the Interest Rates.

3. The Parliament session has begun and the first week was not at all promising. If this trend continues, then that may be a reason for correction.

4. Now, is definitely not the time to add more shares but focus should be on part profit booking. The same shares can be bought back at lower prices as and when the correction comes.

5. The Gilt funds are continuing with their fantastic returns. If a rate cut does materialize then part profits can be booked there too.

6. Technically, the markets had a target between 8450-8650 for this up move. How the markets react from here will tell us if there is going to be a 100 points correction or a 300-400 points correction or whether the up move will continue to 9000.

The focus now should be purely on booking part profits. Now, is not the time to make fresh purchases. Markets always give an opportunity and they surely will give an opportunity to buy.

Sunday, November 23, 2014

Surge before some correction

The markets continued with their moves higher and have moved into the resistance zone of 8450-8650. Even though the markets are moving higher, the Advance Decline ratio on many days is not very favorable. Let us see what moves the markets could make.

1. The markets are awaiting a RBI rate cut on December 2nd. If no rate cut then a correction could set in. If a rate cut happens then the markets would surge even further.

2. The Winter session of the Parliament begins on Monday and all eyes would be on what kind of bills the Government is able to pass through.

3. The FIIs were net sellers on Friday.The first time they have sold in the month of November.

4. The 10 year Gilt yields have come down to 8.17 %. In the next few months they are expected to come down to 7.75 %. A short term gain can be made by investing in Gilt funds.

5. With the rate cut announced by China and stimulus by ECB, global liquidity will remain good.

6. 8450-8650 are strong resistance zones for the markets. Looking at the rise from 7724, a target comes to around 8640.

Now, is the time to book profits for stocks bought earlier, lower the cost price and be ready to buy them back again at lower levels.

Sunday, November 16, 2014

Markets Continue Making new Highs

The markets continued making new highs on the back of FII inflows, weak oil prices and low inflation. The markets look set for for 8450-8650 range in the coming weeks. Let us look at the developments of the last week.

1. The oil prices corrected further last week and the Government instead of reducing the prices very smartly increased the excise duty on petrol and diesel. What this will do is increase revenue by 6000 crores in the remaining months of this fiscal year. Also, tomorrow when the oil prices rise, the Government can shield the Indian public by rolling back the excise hike instead of increasing the prices.

2. The FII flows have continued unabated. the first 2 weeks of November have led to an inflow of about 7500 crores. As long as the money flows in, the markets will continue to rise.

3. The next major trigger for the markets will be the Winter session of the Parliament which begins from November 24th. The passage of key bills will set the tone for the markets.

4. The RBI policy is in early December and it remains to be seen if the RBI will cut interest rates.

5. Gilt funds have shown a smart rally and returned about 10-12 pc in the past 6 months.

6. Profit booking can be done at slightly higher levels. If the markets rise by another say 200 points on the Nifty this week, I would suggest partial booking of profits.

Everything looks hunky dory at the moment ad it is safe to book profits in the markets. remember the markets have risen from 7724, a rise of 691 points ad a breather may be round the corner.

Sunday, November 9, 2014

Markets consolidate their gains

It was a truncated trading week with the markets open only for 3 trading sessions. The markets closed flat for the week but many stocks hit their all time highs. Let us explore what can happen next.

1. The Modi Government Cabinet expansion is a significant milestone. It inducts many new dynamic faces like Manohar Parrikar and lessens the workload on existing Ministers.

2. The Winter session commences on November 24th and all eyes will be on how the Government clears the pending legislation. This can influence the way the markets move.

3. With the Bank of Japan announcing stimulus, the easy liquidity continues. This will ensure the FII flows and the data for November has been positive so far from the FII inflows.

4. The crude oil prices continue to remain low thus helping the fiscal deficit.

5. The markets have given a technical breakout and the targets could be between 8450 - 8600. There could be a 10 pc decline either before the budget or after the budget.

6. At 8300+  levels, it does not make sense to create fresh positions but rather book partial profits so that the same funds could be re-invested at lower levels.

7. The Gilt 10 year yield has dropped to 8.21 pc. it could drop further depending on RBI action.

A 10 pc correction could be expected after we rally about 200 points higher. That dip would be a buying opportunity.

Sunday, November 2, 2014

Breakout by the Markets

The Markets closed much above their all time highs on a weekly basis on back of stimulus by the Bank of Japan. The markets have given a breakout and should continue their momentum upwards for some time. the markets have a lot going in their favour at the moment.

1. The Diesel price cut brings diesel down by Rs 6.3 in past 10 days in Mumbai. That is almost a 10 pc cut and this will cool inflation down. This can result in a rate cut and Gilt funds are making merry with Interest Rates declining. Gilt funds make money when interest rates fall.

2. The Bank of Japan stimulus may lead to more money coming to India. close ties between Shinzo Abe and Narendra Modi, Softbank investments in Indian companies all point to more focus on India by the Japanese investment community.

3. The political winds blowing in favour of the BJP has already led to some bold economic decisions being taken. It looks like modi is walking the talk.

4. The FIIs bought almost Rs 3750 crores worth of shares in the last 3 trading days of October. If the  trend continues, the markets will continue to rise.

5. The Indices have moved to all time new highs and now the second line of stocks will start moving up. Minimum targets from the current levels of 8322 are 8450-8500.

6. At higher levels again part profits can be booked, remember the money taken out from the markets is money earned.

I expect the rally to continue for next 2-3 weeks at least till the Winter session of Parliament commencing on November 24th.

After that what happens in parliament will determine the course of events.