Sunday, March 29, 2015

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.

Sunday, March 22, 2015

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.

Sunday, March 15, 2015

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.

Sunday, March 8, 2015

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.

Sunday, March 1, 2015

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.