Sunday, June 7, 2015

Markets await the Monsoon Trigger

The Markets, it seems did make a short term top in the first 3 days of the month and the RBI cut rates by 25 basis points. What next for the markets?

1. The RBI did what was expected and the Met Department downgraded the monsoons from 93 % normal to 88 % normal leading to the markets tanking.

2. The Monsoons have hit Kerala on June 5th and the Private forecaster Skymet still talks about a normal monsoon. The uncertainty over the monsoons means that the markets are not likely to immediately take off from current levels.

3. Last week, I had spoken of 2 scenarios either straight up or first a correction to 7600-7800 levls and then a move up. The possibility of a correction first seems more likely now.

4. The FIIs have sold about 1250 crores in the first week of June and the DIIs have bought double that quantity.

5. Apart from the monsoons there are no major triggers in the month of June. Crude oil prices have eased up a bit after the OPEC meeting.

6. The Bank FD Rates are clearly on the down move. A FD which was fetching about 9.7 pc about 18 months has come doen to 9 pc and is mostly likely to move down to 8.5 pc.

7. The markets have corrected from 8467 to 8057 and a short term rally to 8250-8300 levels is easily on the cards.

The Greece drama has been postponed till the end of the month and the markets will continue to be range bound till then. Best approach is to keep adding good quality stocks many of whom will be ex dividend in the next 2 months thus giving immediate tax free returns.

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