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.
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.
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