Buying Opportunity beckons

The Markets went in a tailspin this week and crashed before recovering to some extent. This gave 1 good buying opportunity. Let us see what further opportunities lie ahead.

1. On Monday, the markets fell by 6 pc and intra-day even more. It was a panic situation with FIIs selling about 5275 crores of shares which is highest in any single day.

2. The Global economic worries fueled this downfall and all stocks fell down.

3. Coming back to our last week's analysis, there were 2 likely scenarios:

"Looking at Elliot,

If wave A was from 9119 to 7940 = 1179 points.(Roughly about 3 months)
    wave B from 7940 to 8654 = 714 points (Roughly about 1.5 months)

Wave C will have targets of approx 7475, 7144 and should end around October end.

Now there is an alternate view in place.

This is we are still in B wave up and there could be 1 more peak around 8600 - 8800 before the fall to 7500 levels. In that case, the current fall should halt around 8100-8200 levels.

Whichever way one looks at, there are 2 things which are certain. We should be revisiting 7500-7800 area once and we would also be revisiting 8800 at least once"

Th Alternate view has been negated now and we are looking at lower levels now before making new highs.

The current fall can be labelled as C with 3 waves down,

A - 8654 - 7667 = 987 points.
B 7667 - 8091 and ongoing which can go up to 8275.

Post that there will be a final fall which will take us again to 7500-7800 range.

The entire month of September at least should go in traversing all this.

Strategy remains of buy on dips and this would be 1 last buying opportunity before we make new highs at 10000-11000 Nifty levels sometime in 2016.

Global Cues drive the markets lower

The Indian markets on the back of global cues fell down by 2.6 pc for the week. However all is not doom and gloom and we may get very good opportunities to buy. Let us look at the Technicals for the week.

1. The markets have begun a correction from 9119 on March 5th. If we see we are in an almost 6 month period of consolidation/correction. When this period ends we will see a sharp up move.

2. Looking at Elliot,

If wave A was from 9119 to 7940 = 1179 points.(Roughly about 3 months)
    wave B from 7940 to 8654 = 714 points (Roughly about 1.5 months)

Wave C will have targets of approx 7475, 7144 and should end around October end.

Now there is an alternate view in place.

This is we are still in B wave up and there could be 1 more peak around 8600 - 8800 before the fall to 7500 levels. In that case, the current fall should halt around 8100-8200 levels.

Whichever way one looks at, there are 2 things which are certain. We should be revisiting 7500-780 area once and we would also be revisiting 8800 at least once

Which makes this a buy on dips market If you enter around say 8000 levels, then even markets fall further you can average it out.

An investor buying with a perspective of next 1 year is sure to make profits.

3. The FIIs sold big time and that is one of the key reasons for the markets fall.

4. IOC FPO will suck out another 10000 crores from the markets on Monday.

All these factors make it a buy on dips market. The main gains for shares bought in the next 2-3 months will be in 2016.

Hopes of a RBI Rate Cut

The markets were down for the week but there was a sudden spike up on Friday which reduced the deficit for the Nifty to a mere 46 points down for the week. What was the reason for the sudden burst of optimism? There are actually 4 reasons for this.

1. The inflation data released on Thursday shows inflation at -4 pc on the wholesale inflation front. This gives 1 more trigger for the RBI  to further reduce rates. The next RBI Meet is in end September so 1 could expect an unexpected rate cut. Maybe the rate cut is coming next week and there were certain people aware of it.

2. There is talk of special session of Parliament to pass the GST Bill in September. This raised market sentiments. Again, markets go up on hope more than anything else.

3. On Friday, the Finance Minister presented a comprehensive plan for PSU Bank reform. People were hired from the Private Sector for the first time as Chairmen of PSU Banks and lots of reforms were spoken of.

4. With the devaluation of the Chinese Yuan, there is talk that US may have to postpone rate hikes to December from September. This is because once interest rate are raised the currency becomes stronger. The US Dollar has already become 3-4 pc stronger to Yuan and further strengthening may hurt US companies who are export oriented.

5. The markets are continuing to consolidate with a positive bias. The longer it consolidates in this range, this range becomes support for the future. 8300-8650 is the key range for the market. A breakout in either direction could take us to 8000 or 8900.

6. Friday rally was different from the usual dead cat bounces. It got stronger during the day and we closed near the highs of the day. Normal relief rallies get sold into during the day and often we see a flat close.

China by devaluing the Yuan has changed the parameters of the game in the short term. All previous calculations go out of the window.

If the rupee continues to weaken, then IT sector and the export sectors gain but imports become costlier.

In 2 months the focus has shifted from the Monsoons and Greece to GST and RBI rate cut. Banks again will lead the rally or the fall.

Markets continue in a Range

The Nifty gained a net 32 points for the week. The markets were range bound whereas the mid caps party continued unabated. The question is will this range continue for how long?

1. The Quarterly Results are out, Parliament session has been washed out. There are no major triggers for move in either direction.

2. The FIIs were net buyers the entire week which is a major positive.

3. Brent crude prices have sunk below 50 USD and this will be a major relief for the Government on the subsidy front. Already, there are talks that on subsidy the Government will save 30000-40000 crores then what was budgeted for and this will be used for Infra projects.

4. Gold will continue to fall and is not an appropriate investment right now.

5. Technically, we are still consolidating between 8300 and 8600. A break of either side would give us a move of 300 points. The targets would then be 8000 or 8900.

6. The markets will continue in their range unless there is a major trigger either locally or globally. A positive trigger could be if the Gvernment is somehow able to pass the GST legislation.

7. RBI may surprise with a rate cut sometime towards end of August or early September. This could be 1 more trigger for the markets.

All in all, better avoid midcaps which have run up and look at large caps like LnT or Coal India which have good long term prospects and be prepared to average at lower levels.

Markets continue in their Range

The markets were flat for the week and they are still not giving any breakout in any direction. Lower crude oil prices continued. Let us see what the month of August brings for the markets.

1. The Crude Oil prices continued to be at year low. This will help the Indian economy.

2. The Monsoon session of the Parliament continues to be a washout. This now seems to have been factored in by the markets.

3. The Greece factor also has gone by.

4. Results continue to be a mixed bag. ICICI Bank results were good on Friday whereas L&T disappointed.

5. The market has no major triggers either to go up or to go down. This has resulted in a sideways trading market.

6. The FIIs continued to be sellers in the week gone by. Unless, they start buying, the markets will not have a very big rally.

7.In the 8500-8600 region, the markets continue to be in no man's land. Buying at these levels can lead to a trap.

The Strategy remains the same. Buy on dips and be cautious at higher levels.