Sunday, January 25, 2015

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.

Sunday, January 18, 2015

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.

Sunday, January 11, 2015

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.

Sunday, January 4, 2015

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.