Year End NAV dressing will keep the market afloat

The Hope of a Rate Cut rally continues and the markets gained a further 1.5 % in the truncated week. The year NAV dressing time is here and the bonuses of the Fund Managers are dependent on the NAV values so expect the markets to remain afloat at least in the first half of the week.

1. The key ingredient of a rally is the FII inflow and till date in March the inflow has been 16500 crores. This has been the highest since March 2014 when it was 25000 crores. As long as the money is pouring the markets will rise.


2. The RBI policy on the 5th of April is a key trigger. A 25 basis rate cut has been factored in. It could also happen that it is a sell on news kind of event. The markets have run up almost a 1000 points and some kind of correction is due.

3. The Result season is in April and as we have noticed in the past the Results season usually the markets are flat to negative.

4. Technically speaking we have resistances coming in from the 200 EMA at 7778 and at 200 DMA at 7900. The layer between 200 EMA and 200 DMA becomes a critical zone. This zone is tested before a breakout or a breakdown.

5. The Global cues are quiet at the moment. So everything depends on the RBI Action in the first week of April.

This is a good time to book profits for stocks bought at a lower level and wait for a dip to buy again.

Nifty in Resistance Zone

The markets continued their upward march after the Budget to close up 1.3 pc. The FIIs have continued to support the markets in the month of March. I feel the post budget rally may be coming to an end and we should soon see a correction of about at least 400 points which should be a buying opportunity.

1. The FIIs have bought big in March almost 12000 crores worth of stocks. This is the highest in the last 2 years.

2. The Markets have retraced the last falling leg from 7600 to 6825 in faster time. This means it has made up the lossses from top to bottom in faster time. This is a bullish sign.

3. The markets may have made its bottom at 6825. What does this now mean for the markets now? It means now that every dip is a buying opportunity. The markets should generally correct about 50 % of the rise before continuing its up move. This is a thumb rule and need not be followed. If we go by this logic then, this means we can touch 7219 once again. 7240 is also a very crucial support for the markets.

4. For a change. I looked at the Technical Indicators like RSI and Stochastic. As the image shows they are at a point where the market usually makes some kind of a top.

5. There is no major news to take the markets up now. The next major trigger is the RBI policy on April 5th.

6. The coming week is a truncated week with the markets being closed on Thursday and Friday. This can lead  to profit booking in the markets.

7. Globally, also for the month of March all triggers seem to be over. There is a saying stocks are always cheaper in April. So, if we continue this rise for 2-3 sessions more and then there is a correction, then the saying will be correct this year also.

FII Buying Continues

The FIIs bought for all the trading sessions in March so far and the index sustained its post budget rise. Let us see what can influence the markets going forward.

1. Every correction in the markets has lasted 12-14 months so far. By correction, I mean the time taken to reach a low point from the top. In this case 9119 was the top. In all probability, 6825 might have been the bottom. It is always said that the markets visits a bottom once. In this case, 6869 and 6825 are very close by.

2. The first up move from 6825 has lasted about 800 + points and may be nearing completion. We may have a 300 400 points correction which would be a buying opportunity. The support zones comes to around 7240.

3. The Advance Tax numbers will be out next week and will be a good indicator on how the companies have fared.

4. The next major event in the Markets is the Annual Results but that is still some distance far off in April. The FOMC meet next week could be 1 trigger for the markets.

5. Technically, we are in the Resistance Zone of 7500-7600, break of which can lead us to 7900-8000 region.

6. This could well be the last opportunity to capitalize on the lower stock prices.

7. The expectations of RBI rate cut in the first week of April is what is keeping the markets up.

As of now, it looks like the bottom is made for the time being and every dip is a buying opportunity.

FIIs buy in Huge Quantities

Finally, after selling for the past few months, the FIIs have bought big in March and the markets have rebounded. Let us see if this rally has the legs to go higher.

1. The Budget was nothing great, the key take away from the budget was sticking to the fiscal deficit target. Many had expected that to infuse growth, the Government would do more spending and as a result of which relax the fiscal deficit target.

2. The FIIs have given a thumbs up to the budget and pumped in almost 6000 crores into the markets in the 4 trading sessions of March. The results were evident and the markets have risen correspondingly almost 10 pc from the intra day bottom of the Budget day.

3. The burning question is what next for the markets. The markets have risen up to the critical resistance levels of 7500-7600. From these levels, the markets can retrace this rise by say 300-400 points to 7100-7200 before continuing the up move.

4. The markets once they clear 7500-7600 will face the next set of resistances at 7900-8000 levels.

5. Only above 7751 we can say that the down move is complete and we are in a fresh up move.

6. So what do we do next? Buy when the markets cools down a bit to 7200-7300. From here the market can make 1 more low or continue higher up.

7. If the bottom is in place, then in the next 18 months, the market should make new highs in the 10500 region.

Most bear markets do not last more than 12 to 14 months. We are almost 1 year since we made a previous top of 9119 and the journey back up should recommence. By bear markets not lasting more than 14 months, I mean the time taken to make a bottom after hitting a top is generally not more than 14 months.