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.

1 comment:

  1. your views on Pharma Companies? Don't you think they are expensive even now? What can be your top picks in Pharma. Thank you