DownTrend Continues

Unless the Union Budget pulls off something which is groundbreaking, I can see the down trend continuing. The DIIs have started selling now and there seems to be no respite to the markets.

1. The latest casualty of the global downtrend is the valuations of the Startups and Flipkarts of the world taking a hit. Morgan Stanley has written down the valuation of Flipkart by 27 pc.

2. The DIIs too have started to sell big. This is a matter of concern. For the month of Feb, with just 1 trading day left  FII have sold 5700 crores and DII have sold 6800 crores.

3. Technically, Feb is supposed to be a flat month but this has been proved wrong this time. Unless there is a big rally on Monday, the market is down 7.1 pc for the month and 11.5 % for the year so far.

4. If the previous lows are broken then the next supports come in around 6450-6550.

5. 1 thing is clear, the time frame for getting return on Investment has got enlarged. 1 would have to wait at least 18 months for stocks bought in the current downtrend.

6. There seems to be no sign of the passage of the GST bill in the Parliament. 1 major trigger for the markets to rally is missing.

7. Unless the FII flow gets back to normal, this down turn will continue. Every rally will be sold off into.

8. I can see this Government losing focus of the issues at end getting side tracked. Unless Modi concentrates on reforms, I see it getting increasingly difficult he being re-elected again.

All in all it is a tough time all around. The Fixed Deposits are not earning more than 7.5 % rate of interest, Real Estate is sluggish and the stock markets are down.

No Pre-Budget Rally this year

Contrary to expectations, we did not have a pre budget rally this year. There are various reasons for it and the way the global cues are factored in, the market may not have a pre budget rally after all.

1. The FIIs continue to pull out money. They have pulled out about 6500 crores so far in Feb and are sellers almost everyday.

2. The Sovereign Wealth funds which had invested their Oil Earnings in India have now begun to pull their money out. That is 1 more reason why we see high FII sell figures.

3. The passage of the GST bill becomes very crucial for the Government this session. With the domestic politics getting ugly to say the least.

4. Technically, the market is stuck in the range between 6850 to 7400. The previous support of 7242 will become a very key factor for further up moves. Technically, we are in a sideways zone.

5. If we look at the big picture, I do not see this market going anywhere for the next few months. It will give very good buying opportunities.7500 and then 7600 remain very key resistances for the market.

6. The Investment Alternatives are very less in these conditions. Fixed Income Instruments are barely getting anyone more than 8 pc. Equities still remain the best asset class to invest. The only change is that the instant gain period is over.

7. The Rail Budget gets presented next week and that will present clues about the Union Budget. It is very clear unless there is something dramatic in the budget or the passage of the GST bill the markets will continue to totter for some more time.

The Silver lining is all major corrections have not lasted more than 12-14 months and we almost 1 year since we hit the top in March 2015 after the Union Budget.

Markets defy Average Fall for Feb

The markets tanked big time and the way individual stocks sold off, it looks like capitulation is happening. Let us see what could be the factors to influence the markets.

1. The Result season has come to an end. The PSU Banks finally acknowledged huge bad loans and that lead to the markets tanking further.

2. The FIIs are continuing to sell big time and till the time they stop their basket selling, the markets will not rise.

3. There is a fear factor in the Global Markets and hence Gold is rising. Only, once this fear factor wave passes over, the markets will start rising.

4. Technically, we are in the support zone of 6400-6800. If 6400 breaks then one can say entire bull market phase is over and we are in a for a prolonged recession.

5. The Passage of the GST bill and the Union Budget are only things which can make the markets rise from these levels.

6. 7400-7600 the previous highs now becomes a strong resistance zone and an area to which the markets could attempt before the budget.

7. The indicators have reached an oversold area and a Technical bounce is due. This bounce could be 400-500 points before we resume the downtrend.

From the way, the markets have fallen it is very clear, that we are in a for a prolonged bear market and it will take at least 1 year to 18 months before the market can make new highs. It is a time to be patient and stay invested in good quality stocks.

Those brave enough to buy now may well see the stocks they had bought doubling in next 2 or 3 years.

FIIs continue to Sell

The markets lost 1 pc for the week even though a late week recovery was made on the back of DII buying. The FIIs continued to sell and till they resume their buying no meaningful recovery can be seen.

1. The dates of the Union Budget were announced as 29th Feb and we may see some kind of pre budget rally brewing if the FIIs stop selling.

2. The IPO market is buzzing with the Team Lease IPO and the Quick Heal IPO opening on Monday. These are well run companies.

3. The GST bill is expected to pass in the coming session of Parliament. If the bill goes through then there would be a big rally else the correction continues.

4. There are no immediate triggers for the markets to rally or fall and hence the market is stuck in a range.

5. Technically, the markets are not giving any clear breakout or breakdown sign. Only above 7693, 7825 we can say we are headed to 8200. 7400 is a strong support zone. A break of 7400 can lead to fresh lows.

6. The crude oil prices have stabilized and so has the rupee.

7. February is not known for any violent moves and we may see range bound trading with a slightly positive bias unless there is major bad news globally.

It is time to be patient and accumulate good stocks.