Sunday, May 17, 2015

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.

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