Holiday Season is here

The truncated week saw the markets rising up. They rose 1.3 pc. The FIIs are on vacation and I expect the expiry week to sustain the gains. Let us look at the way ahead.

1. The markets saw a dip in the volumes towards the end of the week. The FII selling has stopped. This means expiry week will have a positive up trend to it.

2. The Modi PR overdrive means the market has 1 more cheer to go up in the near term. The markets will show some real movement only if it crosses 8300. A rally up to 8100 is normal and is expected.

3. The US Rate hike is behind us and the news heavy items we have put behind us. The next triggers for the markets to move up will come in the corporate earnings around 10th of Jan 2016.

4. The IPO market is kicking which money is floating around. I expect 1 more round of correction or it may have already ended. Value stocks are still cheap to buy.

5. 2016 will be the year of India. There will definitely 1 more rally which will take us to new highs. I will post my 2016 outlook sometime early next week. Please keep watching this space. Happy Holidays and a time to take it easy for the rest of the Year!!!

Technically, we will bounce from here, expiry will take the markets up but that need not mean the woes are behind us.

Keep adding strong stocks at correct valuations.

Holiday Season beckons

The markets rose 2.2 pc for the week.The percentage rise rarely reflects the true picture. Let us see what can affect the markets in the coming week. We are now approaching the vacation period and the time for a significant move is coming.

1. The IPOs continue to suck out huge money from the market. NHAI IPO of Tax free binds will take out the HNI money. It is a very good tax saving tool for the HNIs and those in the higher tax slabs.

2. The money released from Dr Lal and Alkem IPOs is mostly likely  to find its way into Narayana Hrudayalaya IPO. The Retail money will not be available as the Indian love for making a quick buck in the IPO market continues.

3. The FIIs have sold 3800 crores wroth of stocks in Dec so far and the DIIs have bought about 4700 crores worth of stock.The markets have still corrected 2.2 pc for the month which means there is selling in the markets by the third pillar Retail and the HNIs.

4. The FIIs go on vacation very soon and the absence of FIIs means at least selling should not be there. There could be a short term rally but I see resistances at 8100 and then 8300.

5. The overall trend remains down and I see 7200 coming for sure. The overall India growth story remains strong and with Crude Oil and Commodities at multi year lows, the industries which use these raw materials will perform strongly over the long term.

6. We are now 9 days away from the expiry and with most people bearish, the operators can induce a false hope rally manipulating the Nifty. It does not take too much to take the Nifty up by 300-400 points.

7. The Cash stocks are moving up and the Value stocks are hitting fresh lows.

All in all, I feel we are on the cusp of something big and now is the time  to be in Equity, with buy on every dip. Value stocks which will appreciate over the next 3-5 years.

Time to Buy is Here

The markets fell down 2.2 pc for the week to close near the low point of the week and the time to buy stocks is here now. There are several reasons for this and I can see very good reasons to buy stocks right now.

1. The FIIs continue selling and that pillar is not there yet to support the markets. The markets functions on 3 pillars FIIs, DIIs and the Retail which includes the HNIs.The DIIs have purchased stocks worth Rs 1270 crores vis a vis the FIIs selling 3500 crores. The third pillar retail will now get busy saving in tax saving instruments.

2. The IRFC IPO sucked out 4000 crores from the market, NHAI issue is worth 10000 crores hitting the marktes, the equity IPOs of Alkem, PathLabs and many more coming up. All this money is pulled out from the equity markets and locked into these instruments.

3. Even though the Nifty is at 7600, the Value stocks are at much lower levels. The next few weeks will provide us with the best buying opportunity in times to come.

4. This week has the Fed Rate Meeting n 16th December 2015, then the passage of the GST bill to passage. All these are just reasons for the markets to rise or fall. The real reason is liquidity being sucked out of the markets.

5. The FIIs will go on vacation by this weekend. This will ease the selling pressure and may start a Santa Claus rally as the selling pressure will not be there. Also, the year end bonuses are calculated.

6. The Cash stocks have given loads of profit and the smart money locked in the profits in the bonds. No one has the patience these days to wait out for 5 or 10 years. These are the windows of Opportunity which one needs to exploit.

Suddenly, cash will find many suitors and equity on the face of it will no longer be appealing but this indeed is the best of times to buy stocks only if you are prepared to see your stocks go down 20-25 pc from here also.

We are at 7600 but for value stocks we have already reached 7200.

GST to dicate the trend next week

The markets lost about 2 pc to fall down to 7781. The markets are poised at very critical levels with 7700 being the key support levels. Let us see where the markets can go from here.

1. The GST bill has there has to be some headway in the coming week. With the FED meeting poised for 16th December, a movement forward on the GST has the potential to take the markets forward.

2. The key resistance for the markets comes to about 8100. It needs to clear 8100 to make some headway. The next Resistance would be 8400.

3. The markets as per Elliot should touch 7200 or 6800. TA is a an art and not a perfect science. The numbers may not be exactly hit but the trend is usually correct.

4. FIIs continue to sell and that is what points to the markets being lower.

5. In 2009 and 2011, the markets had hit a bottom in December and rallied. There is always the November Feb rally which takes place.

6. Gold prices have hit a nice bottom. I would start accumulating for the long term.

7. The cash stocks have rallied and the Value based stocks are giving a good entry point. I am churning the portfolio.

All in all, it is a very calm Sunday before action packed 2 weekends of GST, Fed Rate hike and lot of news flow based events. Usually, it is a sell on news kind of market.

RBI Policy to dictate direction next week

The markets gained 1.1 pc last week to end higher. We are headed to a data heavy week with the RBI Meeting on December 1. In the immediate next week, I expect the markets to move higher from current levels.

1. The RBI Governor is unlikely to cut rates especially with US Fed meeting on Dec 16th. Rajanl ikes to surprise and may still cut rates.

2. The FIIs continued to be net sellers for the month of November. Hug FII outflows mean that the markets have declined that month.

3. The Gold scheme of the Government has been a success. Instead of ETFs the Investors will now buy bonds from the Government. India has Sovereign Gold Reserves which can be now be held against the Bonds.

4. The FIIs will go on vacation soon, and the Coal India FPO I believe will hit the markets at any moment. Fundamentals suggest a buy.

5. So we are now entering a quiet phase within the markets but at the same time some turbulence due to Central Bank meetings.

Long term view still remains the same, buy on dips.

The Dust Settles

The last few week have been tumultuous and now the dust is beginning to settle. Let us remove chaff from the wheat and filter the noises out. The markets gained 1.2 pc in the last 1 week. The target of 7200 is now 500 points away from the current low.

1. The Power Reform announcements if and when implemented will lead to the Discoms recovering the lost ground. This was the most groundbreaking announcement of the past few weeks.

2. Coal India FPO which will hit any moment, full subscription is advised for the Retail Investors. Coal India gives god dividends and at least Rs 20 can be expected this time around. The dividend yield itself will be around 6 pc.

3. Coal India has got the approval for exploring Coal Methane Blocks, this will need to significant new cash flows for Coal India.

4. The FDI announcements in various sectors will lead to more foreign money flowing and Defence is the key sector I see benefiting. Defence Sector from the Private parties is under developed in India and I see the Private Sector in Defence in India as a sunrise sector.

5. The time to talk is over and the Government will get down to business now. The Phase 2 of Modi first 5 year term has been kick started.

6. Power, Defence, Pharma and Banking are the key sectors I will watch at with special focus on Infrastructure lending.

Things have started moving on the ground. The next few weeks should provide us with more buying opportunities.

Mahurat Pick - Tata Motors

My pick for this Mahurat is Tata Motors. I do not hold this stock in my portfolio for the last 10 years and will add the first lot today. I will not look at it for 5 years and will evaluate it in 2020.

The Reasons for buying Tata Motors stock is:

1. Legacy of Tata Motors is more than 70 years old and the legacy of the Tata Group goes back even further. The Tata Group with their motto of Leadership with Trust is here to stay for the next 100 years at least.

2. The Jaguar Land Rover acquisition has been a master stroke. With this they have access to the latest technology and have moved the Research centre to UK.

3. HorizonNext program is launching cars at the right price point starting with the Bolt, Zest and Kite on its way. In the next 10 years I see Tata Motors having a car in every segment from the Nano to the Jaguar. Once they have loyal customers in place, the same customer will upgrade to the next car in the category.

4. They have right people at the top with Mayank Pareek who set up the Sales Process with the Maruti Team and Karl Slymm before him. The Best Practices from Maruti are being implemented in the Tata Motors Group.

5. India as an automotive market is growing. Society is becoming aspirational and disposable incomes are rising. Savings Rate may be going down but the spends are going up. There is a market for the cars.

6. Look at the trend of sales for Zest in last few months. Chugging along with now nearing 2500 units per month. The stability in numbers is heartening.

7. Capacity is available at Sanand for fresh cars. The Nano is an example of the innovation and frugal engineering.

8. People do not leave the Tata Group for life. They have the Tata Administrative Services or TAS which is second only to the IAS cadre in terms of trained personnel.

9. Vision is clear with the group logo "Leadership with Trust" and the HorizonNext program. This clarity of vision at the group level of Tatas and and at Tata Motors company level is heartening.

10. Price is attractive right now. No one is looking at Tata Motors. In 2001 when it was down in the dumps, I made 10 times the profit and got out.

People, Processes and Technology - the combination of these three lead  to success. Right leadership with streamlined processes in place and having the state of the art Technology in place.

On a personal note, I have owned 5 Tata Cars in the last 14 years. The Indica, Indigo CS, Manza, Nano and now awaiting my Zest.

2 CEOs have intervened to resolve my issues at 2 different points of time. If there is such strong Focus on Customer Experience and Customer Loyalty, the company is a blind buy.

What next? Bihar Results are out

The Elections have come and gone. The Results are unveiled and the real winner of he elections is Lalu and the biggest loser is Nitesh. The markets will present an excellent buying opportunity on Monday.

1. Lalu from nowhere has come and grabbed center stage in Bihar. He has more seats than Nitesh so will grab prime portfolios. Take the credit and give the blame to Nitesh. Nitesh will become Chief Minister but what a price to pay. BJP as an ally was much better and safer than Lalu.

2. If Nitesh had stayed with the BJP, he would have had got few seats in the Union Cabinet plus Bihar he would have continued to rule peacefully.

3. Last week I had said markets should correct to 7200. We are at 7954 just about another 9-10 pc intra day. 7200 is coming and will be a buying opportunity.

4. FIIs continue to sell and that will add to short term pressure.

5. The Gold bonds being floated by the Government represent a very good buying chance to lock into Gold at low prices. I will study more and update.

Happy Diwali and stay tuned for my Diwali Pick before Mahurat Trading. This is 1 stock I am yet to enter but will buy with a 5 year horizon.

Next Sunday will be Trend Decider

The markets lost about 2.8 pc for the week., it has already corrected about 300 points from the top on the Nifty without anyone even realizing it. The Bihar election results are due on next Sunday and that will be the tipping point.

1. Bihar elections will throw up only 2 possibilities, either the NDA or the Nitesh led front wins. If Nitesh and company win the markets will anyway tank and if Modi wins there might be a surge but eventually the markets should correct.

2. I see Yes Bank at levels where it was when the markets were at 7800 and now we are still at 8000 plus levels but Yes Bank as corrected. Banks are usually Lead Indicators of an impending correction in the Nifty.

3. The markets typically peak around Diwali and the euphoric atmosphere is generally used to reel in the last few suckers left. In October 2009, there was a sharp 2 week correction from 5181 to 4538, a correction of 12.5 %. If we extrapolate this now, 12.5 % correction from 8338 will bring us to 7295.

4. The markets are a cesspool of multiple factors. Every buyer and seller thinks he is buying at the correct price. The FII flows continue to remain iffy and I see no great traction in the money flowing.

5. The Cafe Coffee Day and the Indigo IPOs have sucked out a great deal of cash from the markets. IPOs typically occur at the peak of Bull Markets. Remember Reliance Power in 2008. The markets tanked even before the stock listed.

6. IPOs, election results, Diwali peaks all these make a very interesting time for the markets.

I would not put in any fresh money in the markets just churn the existing cash around. I still stand by we visiting 7200 and 10500 within the next one year. What will come first? My model says 7200. Models can fail so we may well see 10500 first though I would put the probability at 20 pc.

The Stalemate continues

Markets continued to remain sideways in the last week and the 3 trading sessions this week. The result season is always flat and I believe the things will remain the same till Bihar results are out November 8th.

1. The Results season sees stock specific movement and that is what is happening currently. The markets are not going anywhere and are at a key resistance level.

2. The markets need a trigger and that trigger could be the Bihar election results. Win or lose, the markets may slide post the results. BJP winning is a bit of a long shot and even if that happens the euphoria may vanish soon. In March 2012, the UP elections triggered similar reactions where even though SP won, the markets corrected when it was clear that the Congress would not be able to play king maker.

3. The Technical Indicators are flashing several warning lights. Technical models are irrespective of fundamentals and as the days go by I am getting more and more convinced that we will visit 7200 first. Technically, first we have to clear 8350 then 8500-8600.

4. Globally, right now the story is China but then these stories keep coming back. I do not thing a rate hike will come in December this year. The Rate hike will get pushed to next year.

5. The FIIs have bought in large numbers in the past 10 days and that is what is supporting the markets. It just needs some trigger for the gun to be pulled.

6. It is a time to be very careful. The mid caps have gone up and same was seen last November. Fresh money should not be put in right now as the risk reward is most unfavorable right now. Buy above 8600 or wait for lower levels of 7200-7500.

The time frame also fits in for the traditional November to Feb rally to take place. Many years I have seen tops around the Diwali week, The current levels of the markets are most unfavorable for any long trade. Going short has its own pitfalls. We wait and we watch.

Bihar elections will be decisive turning point for next 6 months

The markets rallied 3 pc over the week and exit polls for Bihar have turned up interesting probabilities. Various polls have given contrasting views and the next 1 month till the results on November 8th are the key. Let us explore the possibilities.

1. 1 poll gives the BJP a narrow majority while another poll gives the JDU led alliance a clear majority. It is very clear that the elctions will be closely fought and the BJP may just lose the elections. The reason is BJP won 38 pc of votes in the Lok Sabha and they need to win more to win. All State elections that have followed the Lok Sabha elections, their vote share has been less than the Lok Sabha.

2. The votes have polarised and it is too close to call. If BJP loses, in a knee jerk reaction the markets may go down but if the BJP reaches out to other parties and get key legislation cleared then the markets will rise.

3. I am clear about 2 things in mind. Within the next year the markets will visit 7200 and 10500 once. Which comes first is anybody's guess.

4. The Results season will see markets in a range typically with stock specific movements. The markets thrive on surprises and one may just see the markets surprise.

5. Now, is the time to wait and watch or invest in fixed income schemes. These rates are going to stay low for at least next 2 years.

6. The FIIs have started buying and that is shown in the markets moving up. Wait for 8200-8350 to be taken out clearly before further moves.

October is a month of caution.

End Game of the Downmove begins

The RBI came out with a bumper surprise of 50 basis points rate cut when most would settle for 25 basis points or even the fear that there would be no rate cut. The markets were up 1 pc for the week and let us evaluate what the implications could be.

1. The 50 basis point rate cut took everyone by surprise but the markets did not flare up.Nifty has rallied up 175 points or approx 2 pc since the announcement. This also implies anything lesser and the markets may have fallen further.

2. With the Rate cut out of the way, US Fed rate hike postponed  to maybe December the immediate major triggers are over for the markets. The next triggers would be the corporate earnings in second half of October and the Bihar election results on November 8th.

3. The rate at which fixed deposit rates have fallen, its going to be a tough road ahead for small savers. This may be the last chance to lock in at decent rates in Postal schemes which are still offering 8.5 % returns. ICICI Bank has reduced FD rates from 9.5 % in March to max 8.25 %. So, the transmission of rates has already happened for FDs.

4. Technically, the markets can rally up to 8200 and then fall one more last time or fall from current levels and bottom out between 7200 and 7500. Another possibility is markets may rally straight away from current levels. I would rate this probability as the lowest of the 3.

5. In the months of August and September the FIIs have cumulatively sold 31000 crores of shares and DIIs have purchased approx 27000 crores of shares. The markets have fallen about 584 points in same period. This points  to 2 things, the markets will not oup without FII support but at the same time impact of FII selling has reduced. A sell figure of 31000 crores by the FIIs have resulted markets in falling on 7 pc. In earlier times the fall would be much more in percentage terms.

6. All stocks do not bottom out at the same time. Some stock bottom out earlier than others. So, looking at where there is value these stocks can be added even at current levels.

Bottomline: Buying time is here or almost here. One cannot time the markets. So, one can starting adding to the portfolio now.

RBI Meeting can lead to a decline in the markets

The RBI policy is scheduled for 29th September and everyone has taken a 25 basis point rate cut for granted. Let us see what could be the probable outcomes of this meeting.

1. The Governor will announce on coming Tuesday at RBI Half Yearly Policy, the decision on a rate cut. A 25 basis point rate cut has been taken for granted by the markets. The markets will rise if there is a 50 basis point cut or a 25 basis point cut with promises from the Governor of more to come.

2. The Governor may not cut rates but give indications that he is inclined to do so in the future.

3. If there is no rate cut, then the markets will tank immediately. This year the rates have been cut thrice. The first Rate cut was cheered by the markets, it was an unscheduled rate cut. At the time of second rate cut, on announcement the markets made a significant top of 9119 on March 4th which has not yet been broken in past nearly 7 months.

4. In June, when the RBI Governor actually made the announcement on the scheduled today, the markets actually corrected. In a nutshell, the market tends to make a significant top after the RBI meet.

5. Technically, we may in last leg of the down move, with wave 1 correcting 8055 to 7723 = 332 points. Then the 2nd wave up 7723 to 7894 and ongoing. (171 points).

6. The FIIs continued to be strong sellers during the week. Till this trend does not reverse, the market trend will not reverse.

7. After the RBI policy, the next significant event for the markets will be the corporate results after 12th October and then the Bihar election results in early November. Provided the results are favorable for the BJP, then we may be set for the traditional November to February rally in the markets.

RBI rate cut could be next Trigger

The much talked about FED Meeting has come and gone. The uncertainty continues though may be postponed by about 3 months. What else could take the markets higher?

1. The FIIs continued to be net sellers during the week. They bought on Friday. Only if they resume their buying we can see a substantial up move.

2. The Fed decision is now postponed till at least December. The RBI may cut rates at their policy meeting on September 29th. This may prove as a trigger for the markets.

3. Right now, technically we are at a very key junction. 1 more down move may be pending or we may breakout of this correction.

4. 8200 levels become the key levels to watch out. If we break 8200 and go up then we may have broken out of this consolidation phase of more than 6 months. My sense is we may see 1 more correction ending around 7200-7500.

5. Highlight of last leg of down move is that all stocks do not move down equally. Some stocks may have already made their bottoms. It could also be that we correct 200-300 points to correct the up move and then move ahead.

6. Monsoons have also picked up in the last part of the Monsoon season. With low inflation, monsoons out of the way, the RBI will definitely cut rates by at least 25 basis points.

This makes the 7700-7800 region a very strong buying zone. We cannot catch exact tops or exact bottoms. The Risk reward ratio becomes very favorable around 7700-7800 levels to buy.

Fed Rate Hike to be out of the way this week

1 of the major drag on the markets have been the timing of the Fed Rate hike. This event would be out of the way this week, at least for next 3 weeks. Let us see how the markets react to this.

1. The shadow of whether the Fed will start hiking interest rates in September or December will be clear this week. If they do hike, then we may witness some knee jerk reaction or if it gets postponed to December then a rally. The fear is if the US starts offering higher interest rates then the money will move out of emerging markets.

2. The second event for September is our own rate cut. 25 basis points is almost factored in and for the markets to have any meaningful reaction, the rate cut would have to be about 50 basis points. I think the RBI Governor will watch the events unfolding in the US this week before making up his mind.

3. Technically, the markets seem to be close to some kind of bottom. either we have already made the bottom or 1 more down move is pending at 7200-7500 levels.

4. The technical picture is we may rise to 7950-8000 before 1 more down move to 7200-7500 or the bottom has already been made. The FIIs continue to sell and have sold stocks worth 6700 crores so far in September. This looks like pausing only once the Fed gives some clarity.

5. The Bihar elections, the results of which are due by November 11th are 1 more key trigger. If the BJP wins then it is a massive boost to the markets. If the BJP wins, the fear is the Opposition will become more aggressive in blocking legislation.

6. I have been getting repeated requests for a follow on series to the Rising Sun theme, so I am proposing to come up with a series of Stocks for the Long Term, a set of 5 to 8 stocks to be bought at current levels (out of these at least 5 would be new picks).

 Please do let me know in case you are interested. My email id is nish.stockid@gmail.com

I plan to close this by tomorrow.

Follow Up to Rising Sun Series

I have been getting repeated requests for a follow on series to the Rising Sun theme, so I am proposing to come up with a series of Stocks for the Long Term, a set of 5 to 8 stocks to be bought at current levels (out of these at least 5 would be new picks).

 Please do let me know in case you are interested. My email id is nish.stockid@gmail.com

Market near Support Levels

The Nifty continued its fall and fell about 4.3 pc and closed below its previous week's low. This is considered bearish but at the same time there is a glimmer of hope. Let us see what the future lies for the markets.

1. I had a comment on my previous week's post "Why do I feel the markets will rise to 10 k in about 1-2 years time when it is falling everyday"

My answer is this is a passing phase. The question is when the dust has settled which economy will emerge stronger. If you look at currency depreciation, India has been the least amongst all emerging market currencies. Low Oil prices have helped immensely in making cash available to the Government. Coal Block auctions has ensured both the State and Central Governments have enough cash flows assured. We have strong foreign exchange reserves.

The seeds of the next bull market always lie in the current bear scenario. Well run companies will always bounce back when the market improves. The FIIs have pulled out about 23000 crores in the last 1 month or so. Yet we have fallen 1000 points on the Nifty. In earlier days, it would have been much worse.

2. Technically, the 7450-7500 zone is always a strong support zone. There are 3 reasons for this:

a. The first leg of the fall was from 9119-7940. This is 1179 points.
This fall has begun from approx 8655. This leg will achieve equality with previous fall at 7476.

b. The high which the markets hit when the election results were announced is at 7563. This is a crucial support level.

c. If we consider the whole rally from 5119 to 9119 about 4000 points, then 38.2 pc retracemnt comes to about 7591.

So many supports are difficult to break and hence a 400-500 points bounce at the very minimum is very likely.

Also, if the markets extend their fall then the next support levels are at 7119 and 7145.

All in all, he old adage goes buy when everyone is fearful and sell when everyone is optimistic could not have been more truer than today.

Buying Opportunity beckons

The Markets went in a tailspin this week and crashed before recovering to some extent. This gave 1 good buying opportunity. Let us see what further opportunities lie ahead.

1. On Monday, the markets fell by 6 pc and intra-day even more. It was a panic situation with FIIs selling about 5275 crores of shares which is highest in any single day.

2. The Global economic worries fueled this downfall and all stocks fell down.

3. Coming back to our last week's analysis, there were 2 likely scenarios:

"Looking at Elliot,

If wave A was from 9119 to 7940 = 1179 points.(Roughly about 3 months)
    wave B from 7940 to 8654 = 714 points (Roughly about 1.5 months)

Wave C will have targets of approx 7475, 7144 and should end around October end.

Now there is an alternate view in place.

This is we are still in B wave up and there could be 1 more peak around 8600 - 8800 before the fall to 7500 levels. In that case, the current fall should halt around 8100-8200 levels.

Whichever way one looks at, there are 2 things which are certain. We should be revisiting 7500-7800 area once and we would also be revisiting 8800 at least once"

Th Alternate view has been negated now and we are looking at lower levels now before making new highs.

The current fall can be labelled as C with 3 waves down,

A - 8654 - 7667 = 987 points.
B 7667 - 8091 and ongoing which can go up to 8275.

Post that there will be a final fall which will take us again to 7500-7800 range.

The entire month of September at least should go in traversing all this.

Strategy remains of buy on dips and this would be 1 last buying opportunity before we make new highs at 10000-11000 Nifty levels sometime in 2016.

Global Cues drive the markets lower

The Indian markets on the back of global cues fell down by 2.6 pc for the week. However all is not doom and gloom and we may get very good opportunities to buy. Let us look at the Technicals for the week.

1. The markets have begun a correction from 9119 on March 5th. If we see we are in an almost 6 month period of consolidation/correction. When this period ends we will see a sharp up move.

2. Looking at Elliot,

If wave A was from 9119 to 7940 = 1179 points.(Roughly about 3 months)
    wave B from 7940 to 8654 = 714 points (Roughly about 1.5 months)

Wave C will have targets of approx 7475, 7144 and should end around October end.

Now there is an alternate view in place.

This is we are still in B wave up and there could be 1 more peak around 8600 - 8800 before the fall to 7500 levels. In that case, the current fall should halt around 8100-8200 levels.

Whichever way one looks at, there are 2 things which are certain. We should be revisiting 7500-780 area once and we would also be revisiting 8800 at least once

Which makes this a buy on dips market If you enter around say 8000 levels, then even markets fall further you can average it out.

An investor buying with a perspective of next 1 year is sure to make profits.

3. The FIIs sold big time and that is one of the key reasons for the markets fall.

4. IOC FPO will suck out another 10000 crores from the markets on Monday.

All these factors make it a buy on dips market. The main gains for shares bought in the next 2-3 months will be in 2016.

Hopes of a RBI Rate Cut

The markets were down for the week but there was a sudden spike up on Friday which reduced the deficit for the Nifty to a mere 46 points down for the week. What was the reason for the sudden burst of optimism? There are actually 4 reasons for this.

1. The inflation data released on Thursday shows inflation at -4 pc on the wholesale inflation front. This gives 1 more trigger for the RBI  to further reduce rates. The next RBI Meet is in end September so 1 could expect an unexpected rate cut. Maybe the rate cut is coming next week and there were certain people aware of it.

2. There is talk of special session of Parliament to pass the GST Bill in September. This raised market sentiments. Again, markets go up on hope more than anything else.

3. On Friday, the Finance Minister presented a comprehensive plan for PSU Bank reform. People were hired from the Private Sector for the first time as Chairmen of PSU Banks and lots of reforms were spoken of.

4. With the devaluation of the Chinese Yuan, there is talk that US may have to postpone rate hikes to December from September. This is because once interest rate are raised the currency becomes stronger. The US Dollar has already become 3-4 pc stronger to Yuan and further strengthening may hurt US companies who are export oriented.

5. The markets are continuing to consolidate with a positive bias. The longer it consolidates in this range, this range becomes support for the future. 8300-8650 is the key range for the market. A breakout in either direction could take us to 8000 or 8900.

6. Friday rally was different from the usual dead cat bounces. It got stronger during the day and we closed near the highs of the day. Normal relief rallies get sold into during the day and often we see a flat close.

China by devaluing the Yuan has changed the parameters of the game in the short term. All previous calculations go out of the window.

If the rupee continues to weaken, then IT sector and the export sectors gain but imports become costlier.

In 2 months the focus has shifted from the Monsoons and Greece to GST and RBI rate cut. Banks again will lead the rally or the fall.

Markets continue in a Range

The Nifty gained a net 32 points for the week. The markets were range bound whereas the mid caps party continued unabated. The question is will this range continue for how long?

1. The Quarterly Results are out, Parliament session has been washed out. There are no major triggers for move in either direction.

2. The FIIs were net buyers the entire week which is a major positive.

3. Brent crude prices have sunk below 50 USD and this will be a major relief for the Government on the subsidy front. Already, there are talks that on subsidy the Government will save 30000-40000 crores then what was budgeted for and this will be used for Infra projects.

4. Gold will continue to fall and is not an appropriate investment right now.

5. Technically, we are still consolidating between 8300 and 8600. A break of either side would give us a move of 300 points. The targets would then be 8000 or 8900.

6. The markets will continue in their range unless there is a major trigger either locally or globally. A positive trigger could be if the Gvernment is somehow able to pass the GST legislation.

7. RBI may surprise with a rate cut sometime towards end of August or early September. This could be 1 more trigger for the markets.

All in all, better avoid midcaps which have run up and look at large caps like LnT or Coal India which have good long term prospects and be prepared to average at lower levels.

Markets continue in their Range

The markets were flat for the week and they are still not giving any breakout in any direction. Lower crude oil prices continued. Let us see what the month of August brings for the markets.

1. The Crude Oil prices continued to be at year low. This will help the Indian economy.

2. The Monsoon session of the Parliament continues to be a washout. This now seems to have been factored in by the markets.

3. The Greece factor also has gone by.

4. Results continue to be a mixed bag. ICICI Bank results were good on Friday whereas L&T disappointed.

5. The market has no major triggers either to go up or to go down. This has resulted in a sideways trading market.

6. The FIIs continued to be sellers in the week gone by. Unless, they start buying, the markets will not have a very big rally.

7.In the 8500-8600 region, the markets continue to be in no man's land. Buying at these levels can lead to a trap.

The Strategy remains the same. Buy on dips and be cautious at higher levels.

Lower Crude Prices a positive trigger

The markets were down 1 pc for the week. All the commodity prices took a big beating and that is a big positive for the Indian economy. Let us see the factors for the coming week.

1. The fall in metal and crude prices augers well for the Indian economy. The massive infrastructure spend lined up will get done at much lower rates.

2. The FII s have started buying and started buying big time. This bodes well for the markets.

3. The monsoons have picked up again and with almost half the monsoons gone by, the deficit is only 5 pc. For the met forecast of a deficit of 12 pc to come true, the next half of the monsoons should be almost 20 pc below normal which is very rare.

4. Reliance came up with very good set of numbers which should help the markets move higher.

5. The Parliament logjam continues and this is bad news for the markets. This is the only negative trigger for the markets currently,

6. The expiry is on Thursday and markets can be volatile till then.

7. The correction can take us to 8300-8400 levels which would be a good buying opportunity.

8. The PFC FPO opens tomorrow and which is a good buying opportunity as a discount of 5 % is being offered to retail investors.

All in all the markets seem to be in a good shape and the correction which started in March and lasted amost 5 months seems to be coming to an end.

Time for some correction

The markets have been rallying since hitting 7940 and it is time for the markets to take a small breather. Let us see what can be the triggers for the correction.

1. The markets broke through the falling channel which had a height of about 600 points. Technically, the markets should rally up to 8900-8950 levels considering the breakout from the channel at about 8350.

2. The FIIs have turned positive and become net buyers for the past entire week.

3. The Parliament session begins on Tuesday and is expected  to be stormy with Vyapam and the Lalit Modi issue hogging the limelight. The land bill is most likely postponed to the winter session and the GST Bill if it is passed is a big positive.

4. The monsoons have turned into a deficit and are at a minus 6 pc level. Still, the things are not  too alarming.

5. In the very short term, the expiry is cose by and usually the markets cool off before expiry if they have been  bullish earlier.

6. A correction of about 200-300 points is very likely and most welcome before the markets try for 8800-8900.

7. If the markets continue to rally from here, the rise would be unsustainable and may lead to a sharp fall.

There are now 2 options before us:

1. The markets rally to 9300-9500 and make a new high or

2. Rally till 8800-8900 and then fall to 7500.

In case of either of the options, it does not make sense to buy now but wait for some minor correction to buy.

8300-8400 level would be a somewhat safe level to add positions.

All the positives have already been factored and we may see an intra day rally before some correction.

What next for the markets?

The Greece referendum has come and gone. There is no clear solution and the markets went down by 1.5 pc. Let us see what the markets  have in store for us now.

1. The EU Finance Ministers are meeting this week and let us see if any solution emerges out of it. The Greece scenario seems to have been factored in by the markets.

2. The Crude oil prices have fallen by about 10 pc due  to this crisis and that will help India.

3. The Monsoons are slowing down and we are not slightly in deficit. The next 2 weeks become key for the Monsoons.

4. The Results season is upon us and TCS declared just about ok results.

5. The Monsoon session will start in about 10 days time and is expected to be stormy. I expect the markets to remain range bound.

6. The FIIs continued  to sell. After about 12000 crores worth of stocks sold in last 2 months, they are marginal buyers of about 100 crores.

7. Technically, the markets have to cross the strong resistance of 8500-8600. Till then it will remain in a trading band.

8. There are no major triggers for the markets to go up or down. In such a scenario, the markets will remain in a trading range for some time to come.

The current levels offer no safety net for buyers. If the markets correct from here, the next zone would be the 8000-8200 zone.

Markets at Crossroads both Technically and Fundamentally

The markets closed up by 1.2 pc as the investors awaited the results of the Greek referendum. The markets are at a cross roads now, both technicaly and fundamentally.

1. The Greece referendum is on Sunday and the results will be out before markets open on Monday. If Greece elects to stay within the EU, the markets may rise.

2. The monsoons also have reached a critical juncture. We are in surplus of 16 pc with about 25 pc of monsoons gone by. The next 2 weeks become very critical for the monsoons.

3. The Parliaments opens on July 21st and with the Lalit Modi saga, there are high chances of Parliament getting disrupted.

4. The corporate results will start coming in towards the end of next week and usually during the results season the markets are subdued.

5. Technically 8500-8550 is a very strong resistance zone and a breakout above this level will open the gates for new highs.

6. The FIIs have been net sellers in the months of May and June. Still we have gained about 300 points on the Nifty since the month of April. (April 30th) This selling has been absorbed by the markets.

Now, there are 3 scenarios which can play out:

1. The markets rise on Monday on the back of Greece referendum and then start losing ground. (Most likely). We will go back to the 8000-8500 range for a couple of more months.

2. The markets breakout and we rise to new highs. (Medium possibility)

3. We start falling towards 7500 (least likely but possible)

It would not be a bad idea  to book some profits if the markets open gap up on Monday.

Monsoon worries swept away

It was another week of heavy rainfall and the markets to went up. If this continues for a couple of weeks more, the monsoon fears may become irrelevant. Let us see what next for the markets?

1. The monsoons are already in surplus of +26 pc. This against the Met department forecast of -12 pc. Now, for the Met department forecast to come true there has to be a swing of 38 pc overall for which from now on the rains will have to be very poor.

2. Another interesting feature of the rains this time is that it has cover all regions more or less equally. Every year not only the quantum of rain but the distribution is very important.

3. Normal rains means another rate cut could be coming in August-September.

4. The Greece drama continues. For some reasons, the markets seem to be pretty confident it would be all right in the end. No markets are showing signs of panic as in  the past.

5. The markets are critically posed in the 8400-8500 resistance zones. This zone is particularly important because if the markets close convincingly above 8500 then we may see new highs coming in the region between 9300-9500.

6. The FIIs have started buying again in a small manner. If the FIIs start buying, then we would see new highs coming.

7. Also, the last fall took about about 15 sessions from 8489 and we have taken about 10 sessions to rise to a high of about 8423. If the markets take out 8500 within the next week, then we are on track for new highs.

8. The monsoon session starts on July 21st and is expected to be a very stormy session. Whatever rise has to come has to come before it starts. This is another indicator to know whether we are good to go for new highs.

Greece still holds the Key

The markets rallied sharply by about 3 pc this week for the Nifty to close at 8224. This rise had certain strange characteristics. Let us see what these are and what could be the future probable path of the Nifty.

1. The monsoons worries were swept aside and in fact we have received 11 pc surplus rain till about 18th June. A few more weeks of this rain and the monsoon worries will get swept aside.

2. The Greek drama continues and it looks like the drama will be played out till last possible minute. There is a EU Heads summit on Monday where we would get further clues on the market action.

3. All rises in the Indian Markets have always been traditionally on the back of FII flows. This almost 300 point rally has been on the back of FII outflows. FIIs have sold for the past 12-13 sessions consecutively with buying maybe for a couple of sessions in between. On the back of outflows of Rs 1900 crores for May, June has seen about 5500 crores outflows so far.

The markets closed at 8181 on April 30th. So, the markets now at 8224 have absorbed 7400 crores or almost 1.2 billion USD outflows.

4. The monsoon session of the Parliament is only after July 20th and the results also will start flowing in only after 12th July. So next for the next 3 weeks there are no major triggers for the markets except the Greek drama.

5. Technically, 8350 becomes a very critical level both from retracement levels perspective as well as trend line levels.

A weekly close above 8350 would signal the end of ongoing correction. The markets may oscillate in the 8100-8400 range for few more weeks before see a clear move on the either side of the range.

Greece worries hit Global Markets

The markets closed another 1.6 pc down. This correction which started in the first week of March has now gone on for more than 3 months. How much further will the correction go? Let us try and examine the reasons for the correction and how far can it take us down.

1. This is 1 of the first sizeable corrections since August 2013 when the markets hit a bottom of 5118. It could also be the correction from 5933 which the markets hit in Februrary 2014. In either case, if we look at the time component, we are correcting rises of 19 months or 13 months. The correction should last at least 5 months if look at time wise correction. Since we are in a bull market, correction can be shorter time wise but at least 3-4 months.

2. This means that the markets can remain sideways to downward for another couple of months.

3. We have almost hit the target of 7908 and the next key supports come in at 7800 and 7500. We may very well go down to 7500 but before that some kind of a bounce may happen.

4. The Greeks have to make a payment before the end of June. Talks are ongoing between the Greek government and the lenders. If the talks fail, Greece may exit the Euro. This would have a cascading effect on the global economy and the world markets similar to the Lehman effect. I doubt things will come to such a pass, but the shadow boxing is enough to keep the markets down.

5. The monsoons have arrived and are normal for the first 10-12 days of June. These are early days yet and only July will reveal what kind of rains we have received.

6. The FIIs have continued their selling and sold about 4500 crores so far in June to go with their selling of 4500 crores in the month of May.

If we look at the key events driving the markets, monsoons and Greece are the two key drivers. The Greece story may get sorted out either last next week or the week after. The monsoons effect to be clear will take sometime more, maybe 1 more month. This matches in with the 4-5 months time taken for the correction.

Strategy remains simple, buy on dips good quality stocks. The Private banks especially have come to very attractive levels.

Markets await the Monsoon Trigger

The Markets, it seems did make a short term top in the first 3 days of the month and the RBI cut rates by 25 basis points. What next for the markets?

1. The RBI did what was expected and the Met Department downgraded the monsoons from 93 % normal to 88 % normal leading to the markets tanking.

2. The Monsoons have hit Kerala on June 5th and the Private forecaster Skymet still talks about a normal monsoon. The uncertainty over the monsoons means that the markets are not likely to immediately take off from current levels.

3. Last week, I had spoken of 2 scenarios either straight up or first a correction to 7600-7800 levls and then a move up. The possibility of a correction first seems more likely now.

4. The FIIs have sold about 1250 crores in the first week of June and the DIIs have bought double that quantity.

5. Apart from the monsoons there are no major triggers in the month of June. Crude oil prices have eased up a bit after the OPEC meeting.

6. The Bank FD Rates are clearly on the down move. A FD which was fetching about 9.7 pc about 18 months has come doen to 9 pc and is mostly likely to move down to 8.5 pc.

7. The markets have corrected from 8467 to 8057 and a short term rally to 8250-8300 levels is easily on the cards.

The Greece drama has been postponed till the end of the month and the markets will continue to be range bound till then. Best approach is to keep adding good quality stocks many of whom will be ex dividend in the next 2 months thus giving immediate tax free returns.

May turns out to be Positive

At the beginning of the month, I had said, very rarely there are 3 months of consecutive decline and if 2 months are negative the third month is almost always positive or flat. The markets performed true to that dictum and gained 3.1 pc in May.

1. The GDP numbers came in good on Friday. The RBI policy is set for Tuesday. If no cut, then expect a very sharp cut in the markets. If there is a 25 basis points cut then expect a small rally. There would be a big rally if there is a 50 basis points cut. This seems highy unlikely at this point of time.
My favorite scenario at this point of time is a 25 basis point cut. As a reaction, markets will rally and then peter off as had happened in early March.

2. The monsoons are yet to hit the coast of India. This is precisely the reason why the RBI will not have a 50 basis point cut.

3. The markets have reached 8433 and there are multiple resistances between 8500-8600. In fact it is quite likely the markets will make a short term top within the first 3 days of the month of June.

4. There are 2 schools of thought, 1 is markets will go straight up from here or there would be a dip first and then a rally. If there is a dip, then 7500-7600 comes as a logical target and that would be a great buying opportunity.

5. Yesterday, I read an article which made great sense. It states that every 2 years there is a 25-30 pc cut in the Sensex and Nifty levels. This has happened at least for the past 10 years. The last major correction was in August 2013. If this substantial correction happens and since we are in a bull market a 20 pc cut would lead us to 7300.

6. I expect the markets to eventually top out at 10000-12000 on the Nifty within the next 1 year. This means every dip right now is a buying opportunity.

The trick is to buy Quality stocks so that even if the markets fall, these stocks can be averaged. There were 2 big events lined up. First were the GDP numbers and the second is the RBI policy. Once these are out of the way, then the monsoons become the next key trigger for the markets.

Expiry Week Ahead

The markets zoomed 2.4 pc last week and is now nearing  the cluster of resistances. The expiry of the May series is also this week. Let us see what the markets have in store for us.

1. The expected resistances are in the 8500-8600 region and we are almost there. From here, there are 2 probabilities, 1 is we move down to test 7700-7800 or we move straight ahead to test the old resistance of 8800.

2. The next trigger for the markets are the RBI rate cut likelihood on June 2nd and the onset of monsoons. The 2 key events are lined up in early June. Hence, this being expiry week, I expect the markets to be subdued and trade within a range.

3. The FIIs have again begun to buy after the dust up over MAT has settled down. DIIs are also supporting the markets. This has lead to the increase in the Nifty over the past week as the selling pressure has ebbed.

4. Trend line resistance comes to between 8580-8600 for the week. Support comes at 8331.

5. The RBI policy has expectations of a rate cut being built in. If there is no rate cut then that could be a trigger for correction to take place. The RBI may wait to see how the monsoon progresses and then cut rates some time later in June.

6. The Life Insurance and Accident Insurance Schemes launched by Narendra Modi have been a big hit with almost 7.6 crores people opting for it. Such schemes were badly required at nominal rates.

It is now time to be a bit cautious, start booking part profits if bought at lower levels. If this is just a corrective up move then it may mature this week and we hit some kind of interim top. If that is the case then we will continue making lower highs and lower lows. 9119, then 8845 and so on.

A breakout imminent

The markets have been moving in a small range for the past few weeks and a move of 300-400 points is imminent on either side of the breakout. Let us try and examine how the markets can move.

1. The Parliament has ended and the GST bill is still to be passed in the Rajya Sabha.

2. 1 year of Modi Sarkar is nearly done and even though a lot has been done, the sky high expectations have not been met. More on 1 year of Modi Sarkar in a separate piece as it merits an entire separate piece in itself.

3. The exports have fallen for the 5th month in succession underlining weak global demand.

4. The Fuel prices have been hiked and are now only 6-7 rupees below the peak prices. The excise hikes of 7-9 rupees no one is talking about a rollback. The oil prices were supposed to bounce till 70 USD per barrel and are almost there at 66 USD a barrel. Anyfruther rise beyond 70 USD and then the Government strategy needs to be seen.

5. The monsoons are round the corner and the next moves will be dictated by the Monsoon. Till then the Markets would continue to do time pass with mini moves up and down. A clear trend would emerge only after the onset of monsoon.

6. Inflation is under control and the Factory output is flagging The RBI can cut rates on June 2nd or wait for clear indications from the monsoon to cut rates. RBI has demonstrated that they do not necessarily cut rates only during policy meetings the last 2 times.

7.. The markets if they break 8300-8350 can move up move up to 8600 levels and conversely if they break 8100-8150 can move down to next support of 7800-7850.

This would be the broad range till we have the confirmation about monsoons. A poor monsoon would take us as low as 7500. These are important levels as they are the levels hit when Modi won the elections.

The next few weeks would be the lull before the storm and a clear trend would only emerge by the middle of June by when it would also be clear whether we have a poor or good monsoon.

Will GST be passed in the Rajya Sabha?

The markets ended flat last week but that was only half the story. The first half saw a decline and the end of the week saw the pullback as expected.

1. The Parliament session ends in 3 days and the GST bill is expected to be voted upon in the Rajya Sabha. It has aready been passed in the Lok Sabha. If the Government manages to push it thorugh then it would be a very big sentiment changer and then expect a relief rally to 8500-8600 in the next week itself.

2. The FIIs coninue to sell. The latest reason being given is a slew of IPOs in China and money being diverted there.

3. Globally, the things go into a quiet period of time right now. Once the Parliament closes on Wednesday, there would no major immediate triggers for the marets to fall or rally.

4. The next major trigger would be the monsoons in early June.

5. The bond yields have gone back to almost 8 pc from 7.66 pc. If it goes higher to say 8.2-8.3 pc then one can again look at buying Gilt funds.

6. The corporate results have come and gone. They do not show much promise yet.

7. The Auto car saes showed a decent spike in the month of April. Auto sales are usually an early indicator to show that the economy is picking up.

In a nutshell, we may have made a short term bottom at 7997 and can expect markets to trade with a positive bias in the near term, especially if the GST Bill goes through.

Image speaks a thousand words

The attached image speaks a thousand words. Very rarely since 2008, the markets have declined for 3 consecutive months. And even when they have declined the fall in the third month has been very marginal. we cannot catch the exact top or bottom and now may be a good time to buy.

2 months of decline -Time to Buy?

The markets have declined straight for 2 months now. We have corrected about 10 pc from the top in the Nifty and in many individual stocks even more than that to about 20-25 %. Is it now a time to buy?

1. The attached image speaks a thousand words. Very rarely since 2008, the markets have declined for 3 consecutive months. And even when they have declined the fall in the third month has been very marginal. we cannot catch the exact top or bottom and now may be a good time to buy.

2. The 7950-8050 zone is a cluster of support zone in technical parlance. If we breach this we are staring at 7500.

3. The FIIs were net sellers for the last few days and that contributed to the lack of support for the markets.

4. The US fed maintained status quo on rate hikes. This means the party will continue for sometime more.

5. The fuel prices were hiked over the weekend and all the excise rate hikes, there is no talk of rollback. The rate at which this Government is progressing, the political climate may soon turn to be hostile for reforms. It is the next 1 year or never for rolling out reforms.

6. The markets may rally from here, but it may only be a relief rally of 500-600 points. The market is becoming a scalper's markets unlike from August 2013 to Feb 2015, a period of 18 months in which it only went up straight in 1 direction.

A good way to play this kind of market is part book profits and lower the cost of acquisition. In this way, you do not lose if the markets fall nor miss out if it rises further.

Example: If you buy a share A worth about Rs 100. It moves to Rs 110 and you sell half the quantity. Your cost price for the remaining shares becomes 90. Now, if the markets fall, then your revised cost price is less than at the price at which you bought. So you can absorb 4-5 % fall in market terms and still have same price. Which means if you bought at 8181 and markets went up to 8500 and then fall. Your revised cost price would be equivalent to levels bought at 7950-8000.

Time to buy Quality Stocks

It was another down week for the markets and the markets were down by 3.5 %. The markets have come down to attractive levels and it is time to buy.

1. The FIIs have been net sellers entire month and though they show a buy  figure of 16000 crores for the month, the entire thing comes on 21st April when the Sun Pharma stock was sold by Daichi.

2. Even though the markets have corrected by about 10 pc, most of the blue chip stocks have gone down by 20-25 pc.

3. If we consider this as a 3 legged down move then,

A was 9119 - 8269 = 850
B was 8269 - 8845 = 576
C is 8845 - 8273 and ongoing = 572

targets could be 7945 or 7745.

In either case, the time to buy has come. One cannot time the markets to catch the exact top or exact bottom.

4. The Global things seem to be stable. Greece issues come and go periodically.

5. Crude has stabilized around 60-65 USD. Any further spike would put pressure on the markets.

The current fall again highlights the importance of timely profit booking. Stocks which could have been sold in early March are now available at 25 % discount.

Markets trapped in a range

The markets had a down week in the truncated week to again close at the lows of the week. The corporate results have started trickling in and they are pretty lukewarm to say the least.

1. RIL beat expectations and had their all time high record profits. The Retail arm posted profit for the full year. The real story in RIL woud be over the next 5 years when they de merge the Retail and Telecom business again as they had done in 2005.

2. TCS gave a big bonus to its staff on the 10th year anniversary of its listing. Ths also points out to increased attrition being faced by TCS and its move to retain staff.

3. The markets are trapped in a range between 8300-8800. Till the range is broken decisively we will not see moves either to 7800 or to new highs are 9300-9400.

4. The VRL IPO was oversubscribed and it is going to be a lottery for Retail investors those who get allotment.

5. The future move of the market will be guided by the Results season.

6. Probable path for the Nifty could be 1 more up move from here to about 8800-8900 before a dip to 8000 or a straight dip from here.

7. In the last couple of days, the FIIs have begun selling.

The bottomline is clear. The next 18 months at least are very bullish for the markets. It is a buy on dips market.

Mid caps start outperforming

The markets have gone up another 2.3 pc and we are at a critical juncture now. Let us see if fresh highs are in the vicinity or 1 more correction is due.

1. The week had postive overtones for the Government with the overwhelming success of the REC OFS. The only grouse I have with this methodology is that they complicate it so much that it is beyond the reach of most Retail investors.

2. The bids on NSE and BSE were separate. Usually in an IPO one gets a cumulative bid list on either sites. Second is multiple price methodology adds to the complexity. If one bids too  high, then one gets allotted at a very high price irrespective of what the cut off price. If one bids very low, then the bid has to be tracked the whole day.

3. The mid caps are outperforming, while the index is slowly rising, this is the sign of a good bull market.

4. The signing of Rafale jet deal shows that the Government is intent on some action.

5. The Outlook upgrade by Moody's also helps in improving the investor sentiment.

6. The first set of corporate results will be out next week and they will set the tone for the markets.

7. 8949 is the ceiling for the current up move. If we breach that then we are headed for new highs. 8894 is another critical level to be conquered. 1 may fall from any of these levels to make another bottom between 7900-8200 region.

The strategy remains to buy on dips, good quality stocks.

In response to a reader query, I would not recommend Option Trading as a strategy but one can write higher level call options like 9200 call.

Range Bound Market Ahead

The markets gained 2.9 pc in the 3 day truncated week. We are in the midst of a corrective bounce up. Let us see what April brings for the markets.

1. The events of March with Advance Tax payments, booking of short term losses are all behind us. The new financial year begins and lets see what can be immediate triggers.

2. The Corporate earnings are still at least 1 week away. They can provide direction to specific stocks.

3. The Parliament session recommences on April 20th and till then I expect the markets to move in a range of 8400-8800.

4. If we take this down move to be corrective in nature, then it should have 3 waves, 2 down and 1 up.

A - 9119 - 8267
B - 8267 - 8592 (already done), 8694 or 8795.
C - from the above top to 8000- 8200 levels.

Much of April should be spent in this journey within the range.

5. The Global markets also have no major triggers to speak of.

For astute traders, they could book profits at 8600-8800 and make fresh re entry at lower levels.

There is a lack of news flow in the coming weeks either to take the markets up or down.

Time to Buy

The markets continued with their correction and further fell another 2.7 pc this week. The next week is a truncated week for the markets and now the markets have begun to present a good long term buying opportunity for investors.

1. The year end considerations are almost at an end. The next week has the markets open only for the first 3 days. It is a good time to start buying good quality stocks.

2. The markets fell on Yemen air strikes and oil prices going up. I have noticed whenver markets fall on Global worries, they tend to bounce back equally fast.

3. Even though, the markets have corrected about 9.32 pc from the top, many blue chips have corrected about 15-20 pc from the top. In a long term bull markets such drop represent good buying opportunities.

4. 8110-8170 are strong support regions and we are not too far away from that. It is a risk of 150-200 points further downside. the 200 day moving averages reside there and I have seen many times markets bounce from there.

5. The FIIs have continued to buy and that is one key reason to continue buying in this market.

6. Parliament has gone in for a recess and the first set of corporate results will trickle in only by 10-12 April.

There are no immediate triggers for the markets to go anywhere. The truncated week may lead to further correction, but then that is a very good buying opportunity. In bull markets whenever markets correct 10-15 pc it always give a good buying opportunity.

Key Bills passed in Parliament

The markets continued on their downward trend and lost another 1 pc this week. The key feature of this week was the parliament passing a number of key bills and this sets the trend for the next 12 months.

1. 1 of the biggest complaints of the UPA 2 regime was the non performing Parliament. The current sessions of the Lok Sabha and Rajya Sabha were 1 of the most productive in the last 10 years. Key Bills like the Insurance Bill, Coal Bill, Mining Bill have got the assent from both the houses. These will replace the ordinances in many cases.

2. The passing of key bills sets the stage for reforms. Add to it the low crude oil prices and the windfalls from the Spectrum and Coal Auctions, thing seem to be going in the right direction.

3. The immediate movement of the markets is based on many factors like liquidity, year end considerations, overbought and oversold conditions. I believe the current down trend provides a very good opportunity to buy into good companies.

4. Before the Modi Government was elected, the markets were around 7200 levels. In the last 10 months or so, we have a stable Government in place, now we are getting action on the passage of key bills, corruption loopholes have been plugged. This also means the fair value of Nifty has moved up to around 8000 levels from 7200 levels.

5. The current fall is in spite of FIIs buying. The FIIs and DIIs together have bought stocks worth almost 10000 crores in March but still the markets have corrected about 4 pc.

6. The 10 year bond yield has moved to about 7.75 % from a low of 7.65 %. If it goes up further that would be a good entry point.

The Global markets seem to be up beat at the moment and any further dips are good buying opportunities.

Correction Continues

As expected, the markets corrected about 3.2 pc for the week. The dreaded March correction has set in. Will it continue further or will the markets rise from here? Let us try and evaluate.

1. The Advance Tax payments are out of the way. Next week, the numbers of Advance Tax paid by the companies will start trickling out.

2. After this week, the year end NAV pumping will happen and the markets will start rising for it.

3. The markets have corrected about 488 points from the top. The markets will either bounce from somewhere around current levels or the correction may extend easily to over 1000 points.

4. With a correction of over 500 points in place, it is now time to start nibbling in. If the markets rise from here then it is good but even if they do not, if they fall further 500-600 points, one can easily buy 25-30 pc of intended buying quantity now safely.

5. No one can catch exact top or bottom, so if one starts buying at current levels and additional 10-15 pc at every drop of 100 points, then the price can safely be around 8200-8300 Nifty levels in the worst case scenario.

6. The Rate cuts are now ruled out for the time being and the bond yields have also gone back up to 7.8 pc. Around 8 pc or so, the Gilts will offer another entry point with a target of Gilts reaching 7.25 % by the year end.

7. Crude oil prices are again easing up. The Government has got a lot of money from the Coal and the spectrum auctions.

8. The Insurance Bill has been passed in both the houses of the Parliament.  This is the biggest reform of the Modi Government.

All in all, after a correction of about 500-700 points from the top, it would be a good time to buy Quality Stocks.

FIIs pump in the money

It was a truncated action packed week along with a RBI rate cut to excite things. The markets were up 0.4 pc in spite of the rate cut. Let us see what the coming week brings for the Indian markets.

1. The FIIs bought almost 4000 crores worth of shares in the first 4 days in spite of which the markets moved up 0.4 pc. That means someone sold big time. That someone can be the domestic institutions or the operators. (DIIs actually bought about 1000 crores also).

2. The RBI rate cut was sold into. It was a classic sell on news kind of event. Usually, the markets rally and sustain a rate cut news.

3. In March around the 10th of the month, people start pulling out money for the Advance Tax payments. This is a reason why the markets remain subdued during this time.

4. Also, now is the time people start to book losses so as to balance the Short Term Capital Tax payments.

5. The Telecom Auction is going as per expectations. This can be a positive trigger for the markets but a negative trigger for the Telecom companies.

6. The major news is out of the way. If the Rajya Sabha passes the Insurance Bill, then the markets will rise.

7. The markets have corrected from 9119 to 8849 a fall of 270 points from the top. Average falls in recent times have been around 500 points. If this fall exceeds those falls then I expect a 1000 point correction any time between now and June 2015.

That correction will be a buying opportunity. I hope some of us managed to book profits during the up move around the budget time.

Budget out of the way: What next

The Union Budget was presented yesterday and it was a good budget in the sense there were no major populist announcements. The markets rallied on the back of the budget especially the Banking Stocks.

1. For the week, the markets were up 0.8 pc and for the month 1.1 pc. The month of February has gone by and markets usually make a top sometime in March if not February. Prudence would therefore suggest to book profits if the markets rally from here.

2. Since there are no unpleasant surprises in the budget, one can expect the markets to rally a further 400-500 points from here.

3. The Budget was good in the sense, it did not give away free gifts while at the same reducing corporate taxes from 30 pc to 25 pc.

4. The FIIs bought 6700 crores worth of shares in Feb and all this came in the last week of Feb. This can mean the markets can go higher from here.

5. The fuel price hike makes no rational sense. While bringing down the prices, the delay in reduction, excuses trotted out were that 6 weeks old inventory has been to be exhausted first. While increasing the prices, the same rationale is not used.

6. The hike in Service tax will lead to lesser income in the pockets of consumers.

All in all it was a neutral budget with no big bang announcements as well. The current rally can go on for 1-2 weeks more but there is no new trigger to sustain it. Also, how the Parliament session goes can influence the movements of the Nifty.

Around March 15th or so, liquidity concerns for Advance Tax payments can also arise. At such times the markets are flat or negative.

The early part of next week should see some upward movement based on positive feedback about the Budget. Post that, there are no triggers to take the markets up higher.

All Eyes on the Budget

The markets closed flat as expected, since the Budget is the next major event which will occupy the minds of investors in the short term. Let us see where we could be headed.

1. If we get a good budget we may test the 9300-9500 range. If the budget disappoints then we are headed to the 7500-8000 range.

2. The markets after the Modi Government has been elected has gone from about 7200-9000 and traded in this zone. If the budget is not flattering we may go back here.

3. It has been 9 months since the Government has been in power. It has got the benefit of low crude prices by way of which it has collected about 20000 crores in excess tax as well saved at least  an equal amount in terms of subsidy.

4. The FIIs have bought again in the last week. This is an encouraging sign.

5. The Greece problem has been pushed forward by 4 months. So, till end of June the liquidity can continue.

6. This market was booming basically on two factors. Easy liquidity and hope from the Modi Government. The liquidity factor will still continue and the hope factor remains hinged on the Budget.

7. The Global factors have eased off and the Budget session will see important legislation come up for debate. If the Government is able to get these passed without much ruckus, then the markets will rally.

Best strategy is took book profits if we get a god budget and if the markets tank, wait for lower levels to add stocks. This is because if the budget is disappointing, the markets will not rally in a hurry.

Markets on track for new all time highs

The markets recouped all the losses made last week and back to were they were at the end of January. The AAP victory was digested and all eyes are on the Budget.

1. It is said that in Bull markets all the bad news is ignored and in Bear Markets all the good news is ignored. The markets have shrugged aside the AAP victory, the sucking out of liquidity by Coal India and HDFC issues of about Rs 30000 crores and are very close to their all time highs.

2. The next major trigger is the Union Budget. If the market is at all time highs near the budget, it is prudent to lighten one's positions as the markets may correct after the budget. Expectations are high and any disappointment can lead to correction. Another feature of the Budget this time is that it is on a Saturday, giving people time to digest the news as the markets will be closed. This also means no time to exit the positions as the markets will open gap up or gap down on Monday.

3. The FIIs have sold on all trading days in Feb except the last day on Friday. They have sold about 3500 crores worth of shares and the markets have not moved. It means in FII inflow absence the markets will not be able to move up.

4. The Global cues remain supportive for the continuation of the up move. If we look at the markets technically, then a close above 8900 opens the doors for a close above the previous highs.

5. The crude oil prices have increased from about 45 dollars to a barrel to about 60 dollars a barrel. This level is to be watched. Any further increase in crude may affect the markets. 60-70 dollars to a barrel is the optimum range for the Indian Markets.

6. The 10 year G-Sec yields seem to have to stabilised at about 7.7 pc.  The yields tend to bottom out at around 7 pc and top out around 9 pc.

All in all, good times for the markets but profits need to be booked just before the budget in case the markets are riding high. If we get a not so good budget then we are headed to 7500-8000. In case, we get a good budget then the rally may just extend.

Correction after a rally

The markets corrected another 1.7 pc this week. After a breathless rally, the markets look to correct. Let us see the road ahead for the month of Feb.

1. The Coal India FPO and the HDFC offers sucked out about 32000 crores worth of liquidity. This was also one of the reasons why the markets were subdued.

2. The FIIs sold 1100 crores worth of stocks and the DII sell figures were flat. Basically, the market did not have any buying support from any of the institutes.

3. The exit polls point to an AAP victory in Delhi. The Nifty may come down another 200-300 points over this before the pre-budget rally starts.

4. The Union Budget at the end of the month is a key trigger for the markets.

5. The next support levels lie at 8627, 8525 and 8416 levels.

6. The Budget rally can take us to 9200-9300 levels.

7. The Delhi elections by themselves are meaningless in the National Context as there are only 2 Rajya Sabha Seats from Delhi. The spill over effect can be in Punjab where elections are still 2 years away.

Now, is the time to add solid stocks to the portfolio and await the Union Budget.

Markets correcting were not a surprise as a whole lot of new paper was absorbed by the markets. Monday Tuesday may see some more correction over  the Delhi polls. After, Wednesday one can think of fresh positions for the budget.

Delhi Elections and the Union Budget - The next 2 triggers for the markets

The markets dipped 0.3 pc for the 4 trading sessions last week but that is only half the story. There was a spike up to new all time highs and the Coal India FPO also was completed.

1. The Coal India FPO was a big relief to the Government as they will mop up close to 22400 crores. The healthy demand especially about 1 billion dollars worth of applications from the FIIs is encouraging.

2. The market has basically run out of triggers now. The Delhi election results on the 10th of Feb ad the Union Budget on the 28th of Feb are the 2 key triggers in the very short term and the medium term.

3. The next upward targets for the market are at 9200 and 9500. Key support lies at previous top of 8627.

4. The RBI policy meeting on Tuesday could influence the markets. I do not expect any immediate rate cuts in the offing.

5. Further divestment by the Government in ONGC and NHPC are expected to suck the liquidity out of the markets and I expect a rage bound market in February 2015. The broader range could be 8500-9100.

6. The month of Jan saw a gain of 6.4 pc. Whenever there has been a substantial gain in the moth of Jan, Feb has been negative or marginally positive. Looking to a 2-3 pc upside from here gives us 9072 as an upward target at the max.

Now is a time to clean up the portfolio get rid of weaker stocks which have run up and accumulate stronger stocks on dips.

Markets Rise on Stimulus Announcement

On the back of the ECB stimulus announcement, the markets rose 3.7 pc to close at their highest levels. Let us try and see what further positive triggers can be there for the markets.

1. The FIIs have been heavy buyers and have bought stocks worth 7000 crores in the last 6 trading sessions. This is reflected in the large caps going up.

2. If we extrapolate the previous up move from 7723 to 8627, we get a target of 8965 or 9523. we will reach there but after corrections.

3. In spite of the market going up on Friday, the Advance Decline ratio was negative. Simply put 2 stocks were declining to 1 stock gaining. This means only a few stocks were taking the market up on Friday.

4. The large caps have rallied and the next week may see the Nifty not going anywhere but the mid cap stocks rallying from here.

5. The Obama visit may be a trigger for some up moves if we hear some big ticket announcements.

6. The Greece elections are on Sunday and our markets are closed on Monday. Let us see how this impacts markets on Tuesday.
My experience is that any fall is short lived if it is based on global factors and it can be a buying opportunity.

7. All corrections since the rally from 5118 in August 2013 have been 500-600 points. I do feel 1 correction is due of about 1000 points.The only question is when.

The Budget session is on the Feb 28th. I expect further direction to the markets after the budget.

Now is a good time as any to book profits and lock in those profits in other asset classes like Gold or Fixed Deposits.

Markets poised at critical levels

The surprise RBI announcement led to the markets soaring away and the Nifty gained about 2.8 pc for the markets to close at 8514, tantalizingly close to the previous high. Let us try and see what direction the markets take from here.

1. The assumption was that the markets are correcting down from 8627 in 3 waves.

Wave 1 = 8627 - 7961
Wave 2 = 7961 - 8531 (ongoing)
and Wave 3 to take us down to at least 7961 levels.

This hypothesis will be nullified if the markets cross the previous highs from here.

2. If the markets break the previous highs, then we can see a rally till the budget at least to take us to 9000 levels.

3. The Gilt funds gave further returns when the yield for 10 year G-Sec came to 7.67 pc, I would suggest to recommend booking part profits at this level in Gilt funds.

A thumb rule for Gilt funds is keep adding positions when the yield crosses 9 pc and keep part booking yield goes below 7.5 pc.

4. The crude oil prices further weakened and look to be remain weak for the first half of 2015.

5. The FIIs have been marginal net sellers for the month of Jan. With the Government divestment coming up in PSU companies, the upside may be capped because of that.

The uncertainty over whether we are still in a correction or we are headed to new highs will be cleared in the coming week.

Big Moves Ahead

True to form, the markets kicked off January with violent moves in both the directions. For the week, the markets ended down 1.3 pc on the Nifty. Let us look at the coming weeks.

1. Infy with excellent results, gave a late fillip to the markets on Friday. With the rupee having depreciated, the IT stocks stand to gain. Infy maintained guidance even in dollar terms. What will now happen, is that the difference in P/E between TCS and Infosys will narrow. In the past few years TCS had ran well ahead of Infy and now that will decrease.

2. The FIIs were net sellers the entire of last week and have sold 2600 crores worth of stocks for the month of Jan. This is a worrying trend as without FII participation, the markets will not rise.

3. We are again at the key resistance levels of 8300-8400. For the markets to make new highs, they will have to sustain above 8400-8500 region convincingly.

4. Globally, crude oil has fallen below the 50 dollar mark and we should now see some amount of bounce. A sustained period of low crude oil prices bodes well for the Indian economy.

5. The next week should see more corporate results come in. Usually, the results are more or less factored in the prices.

6. There are no real triggers for the markets to go up and sustain there. The major trigger would be the Union Budget which is still 45-50 days away.

The markets usually display 2 kind of trends. They either go up before or after the budget. Very rarely do they go up both times. This time the Budget is highly anticipated as the first full year budget of the new Modi Government.

If the market go up then book profits and if they fall to 7700-7900 levels then fresh stocks can be added. buying now, is sort of buying in no-man's land. The Risk will be high and the reward will be lesser.

Infosys Results to set the tone for January

The markets were rising in the first 2 trading sessions of 2015. The markets rose 2.4 pc in the last trading albeit on low trading volumes. The real test for the markets begin now. There are several reasons for the same.

1. Low volumes were the characteristic of the holiday week, thus making it easier for the markets to rise. When the trading begins in full swing from Monday it remains to be same if the same momentum can be maintained.

2. The FIIs will return on Monday and their support will  be critical. In  the first 2 days of 2015, they just bought 278 crores worth of stocks when the Nifty rose by 113 points.

3. The Results season kicks off on 9th Jan when Infy announces its results. Markets are usually muted during the results season.

4. Technically, the markets have reached a critical resistance zone. If it breaks the 8400-8500 region it will straightaway head to 9000-9200 range. On the other hand, if it corrects from here, it can test the 7700-7900 band again.

5. There have been a series of ordinances in the last week of December so no further announcements can be expected in the short term.

6. The Gilts are expected to inch lower in terms of Interest Rates. The 10 year bond is trading right now at 7.87 pc. With an expected RBI rate cut, it can head to 7.25 pc - 7.4 pc range.

The next week, should set the tone where the markets are headed at least for the month of January.