Sunday, February 22, 2015

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.

Sunday, February 15, 2015

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.

Sunday, February 8, 2015

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.

Sunday, February 1, 2015

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.