Sunday, April 24, 2016

Good results from Infosys and Reliance

The full year result are off to a good start with two bell weathers announcing very good results. The market has now reached a very solid resistance zone and will need some very good piece of news for further rise.

1. The Results season has started off in full swing and the results are very good till now. Results season and Parliament in session means the market moves are in a very narrow band.

2. The FIIs continue to buy but their volume of buying has dramatically reduced. Till date in April they have bought 2000 crores worth of stock whereas they bought 26000 crores in entire March.

3. The Global cues are neutral at the moment. The next big triggers are still some time away. THe UK vote whether to stay in the EU is in June, election results for the assembly elections are still 1 month away and the progress of the monsoons still 45 days away.

4. The Parliament is in session the next week onward and expect the Opposition to block the proceedings over the dismissal of the Uttarakhand Government.

5. Technically 7950-8000 are strong resistances. Logically, the markets should correct to the 7250-7500 band before making attempts for further up moves.

All in all, a dull time for the markets. It is a good thing to book profits for those who bought stocks at lower levels.

Markets always give a chance to buy stocks.

Sunday, April 17, 2016

Fixed Income Options in Falling Interest Rate Regime

Let us take a break from the normal markets this time and look at the various fixed income options available especially for the Senior Citizens. A friend of mine had this query and I realized this might be something many of us might be looking at.

1. Bank Fixed Deposits - The Rates have crashed and this becomes the most un viable option of all. The benefit of Bank Deposits is that easy liquidity is available.

2. NCDs - Many non convertible debentures are listed on the NSE and are can be bought through Open Markets. Some like L and T pay about 10.24 % twice a year. There are other NCDs also listed of less reputed players.

3. Tax Free Bonds - One should always apply for every issue and once we get proportionate allotment keep accumulating these tax free bonds. No Income Tax needs to be paid on these bonds' interest every year.

4. Debt Funds - A clear idea of good debt and income funds can be had on I can spot many funds which have consistently given returns of 8 to 10 pc per annum. Now, the catch with such funds is that one needs to hold them for 3 years to qualify as Long Term holdings. Also there is a Dividend Distribution Tax to pay. This the MF will pay on your behalf.

Now, if you go for the growth option and liquidate the gains, Short Term Capital Gain will be as per your income tax slab. This option is good for Senior Citizens who are not paying much income tax.

5. In case one is a Senior Citizen, then there is a Government of India Scheme with assured 8.6 % interest per year.

So these are the options available. The next 2 years are going to be very tough for fixed income folks and one must look at all possible options to squeeze out the last penny from our investments.

Sunday, April 10, 2016

Sell on News Event materializes

The RBI Policy has come and gone. It announced a 25 basis point reduction and not the 50 basis points which the markets was expecting. April is a month of corporate results and I expect  the markets to be flat with a negative bias.

1. The entire rise from 6825 to 7777 can be corrected. The targets for this correction can be 7413, 7301, 7188 or 7050. This would be the dip which presents a very good buying opportunity.

2. The RBI will not cut rates further till it gets to see the progress of the Monsoon. The GST Bill also is not likely to get passed very soon.

3. The FIIs have become marginal net sellers for the month of April so far. Any up move is largely dependent on FII inflows.

4. Stock moves have become very sector specific. In the last 2 weeks, the Pharma stocks were heavily battered. Front line Pharma stocks are always a very good bet. The USFDA observations are always closed.

5. Globally, the markets do not have any positive clues.

6. The next 2 weeks are truncated weeks with 3 trading holidays on April 13, 14 and 19. This will lead to very subdued movement in the markets.

7. The Corporate earnings are expected to set the tone for the markets which will start coming in from the next month.

8. There are 2 ways at looking at this rally. 1 is that the correction ended at 6825 and this is a fresh impulse under way. Second is that this is just a corrective up move and 1 more leg down is pending to new lows.
Whichever way one looks at it, 7250-7400 seems to be on the cards and which would be a very good buying opportunity.

Sunday, April 3, 2016

RBI Policy to dictate the next course of Action

The RBI policy is on April 5th and expectations are being built in of a 50 basis points cut. The rally so far from Budget day has been on expectations of a Rate Cut. The RBI policy could well turn out to be a Sell on News event.

1. The FII continue to buy. They bought about 24000 crores worth of shares in March and that is one of the key reasons the markets have rallied so far.

2. The Government commitment to meet the fiscal deficit target as well as the Rate in Small Saving Schemes has led  to expectations of a higher rate cut. Governor Rajan normally holds his cards close to his chest so one never knows.

3. April is the month of full year results of companies. Result months are typically flat to down months for the markets.

4. The Sell in Feb, buy in April saying which usually comes true states that same stocks are usually cheaper in April than they were in Feb. The same may not hold true this time as the markets were down in Feb and up in March. The adage can be modified to get the stocks cheaper than their peak prices in March.

5. For the last 5-6 years, April has been mildly negative to a flat closing month. Let us see what this month brings in.

6. Technically, we are heading into a resistance zone from 7800 to 8000. Supports remain at 7600, 7450 and 7250. The markets may go down towards 7200 but not below that.

7. The Pharma stocks have been beaten down on USFDA warnings and as such present a good buying opportunity.

It is time to be cautious, book a little profit and wait for dips to add more.