Sunday, January 31, 2016

How has February fared after a weak January?

This time I am taking a break from the usual weekly posts and trying to analyze statistically how the month of Feb has fared? Feb usually is the month of hope with the Union Budget coming up. Let us take a look.

1. In the last 15 years, Februray has been negative only 6 times which means generally February is a positive month.

2. When the month of January has been negative, February has been positive only once has been Jan, Feb both negative.

3. The maximum gain in the month of Feb has 6.2 pc and loss 5.7 pc. Taking an average swing of 5 pc we get a range from 7941 to 7184. This means book profits closer to 7950-8000 and start buying closer to 7200-7300.

4. The FIIs bought on the last day but still they ended up selling about 14356 crores for the month.

5. The 100 week moving average also comes to 7969. This means 7950-8000 becomes a very crucial resistance for the markets.

6. The entire down move could have ended at 7241 or 1 last leg is pending. This could be possible as corrections usually last for 13 months and should end sometime in April.

In any case, 7200 to 7600 is a very good buying range for long term and 8000-8200 is a range where profit can be booked to see if the markets rise further.

Sunday, January 24, 2016

FIIs continue to Sell

The markets recovered almost 200 points from the bottom to close almost flat for the week and in the process also formed a Doji. Is a bottom in place? Let us look ahead and see what the markets have in store for us.

1. Technically, the markets have met all the criteria for a bottom to be in place. 7118 on the day the election results were declared that remains a key support area. This also means the euphoria over the Modi election is over now.

2. The fall may have ended or we may now retrace the fall from 8336 to 7241. If this is the case then the targets are 7659, 7789 and 7917. Only above 8117, we can contemplate that the correction is over. Time-wise the correction can go on till end of March. In which case a rise now and 1 more fall.

3. We have the famous 8 year cycle, in which every 8 years the market corrects big time. In 2008, we fell from 6353 to 2252.  If we take 5118 in August as the start of this rally, then the targets were 7591, 7118 and 6646. The 6350-6400 is a long term support area and breach of this would put an end to the Bull market.

4. The indices tell only part of the story. Reliance is almost at 52 week high and Nifty at 52 week low. Which means the other Nifty components, mainly the Banks have lost big time. If India has to do well, the Banks have to do well and the Private sector Banks represent a lot of value.

5. The FIIs continued to be net sellers and till this trend continues, there cannot be a big rally. They have sold 13500 crores in Jan with the DIIs buying 11500 crores. There are 4 trading days to go in Jan and if this trend continues it would be the largest monthly outflow since August and September.

6. Fundamentally, for India low crude oil prices is a very good thing even though our exports may take a hit. Repatriation of money from the Gulf will also stop. There are layoffs in the middle east. Petroleum products form 18 pc of our exports and lower crude prices means lower exports in terms of value.

7. Fundamentally also we are at cross roads, Modi has done a lot in the 20 months in office, but a lot more needs to be done like the GST bill.

I would say this is amongst the best time to add quality stocks provided one has the faith in the India Story as also the willingness not to get scared if we see much lower levels from here.

Sunday, January 17, 2016

Stocks at Attractive Levels

The markets continued their downward momentum picking up from the first week to lose another 2.2 pc. There is an environment of doom and gloom everywhere. Let us look and see if the things are really as bad as they seem.

1. The Results season has kicked off and Infosys has shown that innovation still leads to out performance. TCS seems jaded and Infosys seems on an upswing. It is a cyclical story and the baton keeps swinging between the 2 giants.

2. FIIs have sold and sold big in 2 weeks of Jan 2016. Almost 7500 crores worth of shares. This is a huge figure and the DIIs have bought about 5300 crores. There are various bond issues sucking out money from the markets. The FIIs are selling not becuase they have given up on India but becuase they are under pressure to bring money home.

3. China slowing down has lead to commodity prices coming down and India is best poised to take advantage of this. The money one puts in now will definitely reap rewards 12 to 18 months down the line. If we take the worst case scenario of Jan 2008, then at that time in time of panic the stocks bounced back in March to give 20-30 pc returns before again falling down.

4. Every 2-3 years such scenarios come in the Market and that is the time when the stocks are to be tanked up. If everything is falling, then one cannot question why a particular stock is falling down. The Budget session and the passage f the GST Bill becomes very crucial at this point of time.

5. The Sovereign Gold Bond issue is another option for those who want the safety of Gold and earn 2.75 % interest per annum.

6. Technically, we are approaching the support zone of 7200-7400 and from where the markets can bounce up 400-500 points. Whether this is the last leg of the fall is not clear.

If A was 9119 - 7940 = 1179 points
B was 7940 - 8654 = 714 points

C should be  7475 already achieved or 7154. Technical Analysis is an art not an exact science so we may well be in the last leg of the fall.

The best approach is buy fundamentally strong stocks, be prepared for lower levels and be open to averaging. Folks should be willing to stay in the markets not get worried by everyday falls. The Best money is made in the scenario prevailing today.

Sunday, January 10, 2016

China spooks the Markets

The markets lost 4.5 pc in the first week of January as fears over China slowing down led to world markets having a bad first week of January 2016. For long term investors, this is the best time to buy, if they believe in India.

1. The world markets were down and if the world markets are down, India follows suit. This is because FIIs have to pull out funds and they do basket selling. It is not as if there is a problem with India. They have pulled out 3300 crores in  the first week of Jan itself.

2. Crude oil prices are at 11 year lows which means the fiscal deficit will definitely be under control. The 7th Pay commission handouts will lead to rise in  the consumption story.

3. Gold has started inching up because of the fear factor but because of the long commodity cycles, gold will remain in a cyclical bear market for few years to come. Thanks to the rupee depreciating, Gold will continue to do well as an asset class.

4. The Results season will kick off in right earnest from the next week. Results month is usually a sideways to slightly negative month.

5. Large caps have seen a fall whereas mid caps are still flying high. The situation has to correct, and it is prudent to selectively book profits in mid caps which have given good returns so far.

6. 7500 is the next support for the market and 7200 after that. We hit a top of 9119 in the month of March and have completed 9 months of correction. 13 months of correction can follow so we may take out previous highs any time only after April 2016.

It is a time to buy and buy selectively. Buy quality names which you should be willing to buy even if the market goes down further.

Saturday, January 2, 2016

Round Table for 2016

I am taking a break from the usual weekly format which I usually post in. My article had got selected for the Round Table which was published about 2-3 days back.

I am giving the link here.

My part is as below:

Nishit Vadhavkar 2016 Will Be The Year Of India
With low commodity prices globally, India will get the raw materials cheap for the Make In India Program. India, being a crude oil importer with almost 80 pc of crude imported, will have a lower fiscal deficit. Lower steel prices will further help in infrastructure development at optimal costs. Domestically, good governance with transparent auctions of Coal, Spectrum the roadblocks to doing business in India have been removed. India will have the highest GDP growth rate amongst key economies of the world, coupled with a falling interest rate regime, low inflation, aspirational middle class, we have a perfect recipe for markets to take off. Sectors I am most bullish on are Capital Goods, Private Banks, Defence and Power Sectors. Low commodity prices, good governance coupled with Managements with high Integrity in the sectors mentioned above will lead to winners in one's portfolio.

2016 is the year of hope, year where big money is to be made. A rare combination of events has lead India to be in the sweet spot it is in.

Copy paste the link if doesnt open to the Round Table views.

I would also take this opportunity to thank my mentors Taran Marwah and Subhankar Ghose for their guidance.

It is the time for new beginnings, to leave the old behind and have fun.