Sunday, December 28, 2014

2015: Crunch Year for Reforms

The markets have rallied in 2014 on hope. they have rallied about 30 pc on hopes of a new Government and good Governance. 2015 is the crunch year when the Government has to deliver on the promises made.

1. It is soon coming to crunch time for the Government. The Reforms have to be put in motion. The Union Budget is the first milestone which can be seen.

2. The Government has taken an ordinance route for key bills but they will have to be validated in the next Budget session. The Budget session starts in late February.

3. The markets are now at a key inflection point. They can continue rallying on hope till the budget or continue their correction and then if the budget is reform oriented then rally after the budget.

4. The FIIs have been net sellers the entire month of December. This has partly been due to global reasons. The US posted a GDP growth of 5 pc and the money is flowing towards the US. The Dollar is strengthening and the US equity markets are on a roll.

5. Technically, the markets should touch about 9000 once in the first half of the year.

6. After hitting the top of 8627, the markets corrected till 7961 a fall of about 666 points. Then the markets rallied till 8365 a gain of  404 points. If 1 more down leg is pending, then this could have targets of 7699 or  7300.

This is now a market which is a buy on dips markets. The area around 7700-8000 offers a very good buying opportunity.

Even the Gilts have gone back to a yield of about 8 pc which also gives another entry point into the Gilt funds.

Sunday, December 21, 2014

Action Packed truncated week ahead

The markets hit a short term bottom at 7961 before retracing rapidly. The first round of fall may be over and now there would be some relief rallies. The coming week is truncated due to Christmas and has 2 events lined up. Let us see how the markets react to these events.

1. The markets closed flat for the week but that only tells part of the story. There was a dip of 3.2 pc in the early part of the week which was retraced in the latter part of the week. This could mean 1 leg of the fall is complete and we may see a flat to sideways markets for the rest of 2014 with a positive bias.

2. Targets on the upside come to 8294, 8373, 8451 and 8493. Only a decisive close above 8500 will tell us that this fall is over.

3. The Reform agenda has got stuck in Parliament and will be stuck if nothing happens in the next 2 days.

4. The FIIs have consistently sold in the last 8 trading sessions.The markets have not tanked completely because of DII support.

5. The crude oil prices continue to be around 60 dollars, the Russian Rouble has crashed from 30 to a dollar to about 60 to a dollar.

6. The G - Sec yields spiked up showing uncertainty and hesitancy about rate cuts.

7. On Tuesday, we have the results for Jharkhand and J&K. The BJP is expected to sweep Jharkhand but the same cannot be said of J&K. In case they perform well in both States, then the markets may rise.

8. On Wednesday is the F&O expiry. Owing to these 2 events, the markets may remain volatile.

The Strategy remains the same. Buy on dips only.

Sunday, December 14, 2014

Short Term bottom may be in sight

The markets continued their correction and fell this week also. The markets fell about 3.7 pc to close at 8224 for the week. The correction has been ongoing for a couple of weeks from the high of 8627.

1. In this present bull market each rise has been about 900 points and correction about 450 points. If we apply that logic then we may be close to a short term bottom at about 8150-8180 area.

2. If the fall continues, then it would imply a larger correction, maybe a correction to entire 5933-8627 rise which could be around 1000 points correction.

3. It would be good to accumulate a few stocks at around 8150 area and keep sufficient funds to add more at lower levels.

4.The FIIs have been net sellers in the past week and hence the market has not got any support.

5. The Gilt funds have given an annual return of about 19 pc. The max return they have give over a period of 1 year is about 25 pc. This implies a gain of another 7-8 pc over current levels can be had.

6. The Parliament session has so far failed to pass any major bills. If the logjam continues it would be bad for the markets.

7. On Monday, the markets may witness a fall due to the poor IIP numbers and the US fall on Friday. It could be a good chance to pick up a few stocks.

Overall, slowly it is time to buy again on declines. watch the 8150-8180 region carefully. If it closes below these levels then we may see 7800 levels on the charts.

Sunday, December 7, 2014

Time for caution at current levels

The RBI policy has come and gone. While the rates have not been cut, a hint of rate cut early next year has been made. The markets corrected slightly, but individual stocks continued rising. Let us see what next for the markets.

1. 1 of the key triggers for the markets, the interest rate cut has come and gone. The stocks, especially the banking stocks were rising on speculation of a rate cut. The Interest Rates on 10 year gilts has fallen to 7.93 pc which is a 16 month low.

2. The Parliament session has been in progress for almost 2 weeks and no major reform bill has been passed. 1 more trigger for the market has not materialized.

3. The FIIs will be on holidays after 2 weeks and the inflows may slow down. The markets towards the second half of December will be listless.

4. The crude oil prices have stabilized around 70 dollars a barrel. The Government has increased the excise duties on Petrol and Diesel. This will ensure that the fiscal deficit targets are met but at the same time, the citizens do not get the full benefit of crude oil price reduction.

5. Internationally, there are no major triggers for the markets right now.

6. It makes sense to book part profits and buy the stocks back when the markets correct.

Right now, it is the time to sit back and enjoy. Book part profits and wait for the markets to correct to resume buying again. markets have rallied from 7724 to 8627 a rise of almost 900 points. Usually the markets rally 900-1000 points before retracting 30 - 40 pc of the gains.