Sunday, May 29, 2016

Technical Breakout in the Markets

The ferocious up move in the last 3 days broke through several technical barriers and one can reach several conclusions from the move. Let us try and explore each 1 of them.

1. The downward trend line joining all the tops from 9119 (The previous All time high in March 2015) has been convincingly broken on the up side. This means that the correction is over.

2. 7900-8000 was key resistance as well as previous top, that has been convincingly broken and now becomes a support level.

3. There will be retracements of the entire up move from 6825 to 81xx or higher. These would be buying opportunities. The retracements would approx be at 7850,7650, 7500 and worst case 7350. It is unlikely we would go below 7500.

4. On the up side the previous top of 8336 becomes a target. Also, trend lines give a resistance between 8300-8350.

5. The markets may correct the up move from 7715 to current levels before 1 more leg up.The targets for this correction could be 8000, 7950 or 7900.

6. From sell on rises, this has now become a buy on dips market.

7. The FIIs have bought for the last 3 days but still remain net sellers for the month of May.

8. The large caps have rallied. Now, they will take a breather and the mid caps will rally now.

9. The weekly Bollinger Bands indicate some cooling off for the markets.

The structure of the market has changed now. The correction is over and we have a bottom in place at 6825. We can never catch exact tops or bottoms and even if we get a chance t buy at 7500 or 7750 now, we should grab it with both hands.

Sunday, May 22, 2016

Flat Markets so far in this Financial Year

I just happened to look at the market movement post 31st March and we are at the same level since then. Almost 2 months have gone by and no movement. This means a range breakout or breakdown is coming soon.

1. On March 31st 2016, the markets closed at 7738 and yesterday they closed at 7749. The high and low in this period is 7516 and 7992, a range of 476 points. So if the markets break 7992, then they may head to 8468 and if they break 7516, target is 7040. In the month of June I am sure we will come very close to either of these 2 levels.

2. The FIIs continued their selling and now are net sellers for the month of May. If this trend continues, then the markets will see further downsides.

3. Mahindra Financial is coming out with a NCD offering and coupon rate of 9 pc for 10 years seems very attractive to me. You can get 9 pc locked in for the next 10 years. This current low interest rate regime will continue for at least 2 years more.

4. The Election results were more or less on expected lines and hence the markets sort of ignored them What I have noticed is post results, invariably the markets trend to drift irrespective of the results.

5. The market behavior over the last few days has been indicating some form of correction. There are no new immediate triggers present.

It is time to keep fresh cash ready. AT every dip, one can start accumulating. The time to buy will be soon upon us.

Sunday, May 15, 2016

Election Results to watch out for

The Markets are in a somnolent state oscillating in a thin band of 200 points on the Nifty. The monsoons in a couple of weeks or so will be 1 solid trigger. This week we have the election results of 4 Assembly States.

1. Usually, State Elections should not affect the markets but in 2006, the markets had a steep crash after these results. The BJP is a marginal player in most States, except Assam. This result is very crucial for the Congress Party. If they are able to show a strong showing and retain Assam and Kerala, then the markets may take a plunge.

2. The FIIs have been marginal buyers. They are not pumping in huge quantities either. This is 1 more reason why the market is not giving a breakout.

3. Technically, as is for the last several weeks, 7950 and 7750 remain key levels. We ended 13th April with 7850 and now we are at 7815. The markets have not gone anywhere in the last 4 weeks.

4. The Met Department is supposed to issue a second monsoon forecast today. I expect it to be positive.

5. The Parliament has closed and there will be no action till the Monsoon Session in June. No GST bill passed so far.

6. The markets are listless and waiting for a trigger to either rise or fall. I expect this scenario to continue, firstly at least till Thursday when the elections results are out and secondly the more major trigger, the progress of the Monsoons.

There are individual stocks which give buying opportunities and my advice is to pick them when you feel the price is right. Such stocks may not fall further when the markets fall.

Sunday, May 8, 2016

7900-8000 becomes a firm ceiling for the market

The markets again had a negative week and the markets have not moved much in the past 3 weeks. The triggers for the Market movement are almost done with in the near future. Let us evaluate what can move the markets in the near future.

1. The progress f Monsoons in the first week of June and the UK referendum on whether to stay in the EU in late June are 2 big triggers and which could be positive for the markets.

2. The FIIS have sold nearly 750 crores in the first week of May and an equal quantity has been purchased by the DIIs. There seems to be a overall lack of interest.

3. Globally, there seem to be no major triggers on the anvil.

4. The major corporate results have come and gone. Infy, TCS, HDFC bank surprised on the positive side whereas Axis and ICICI Bank had negative surprises.

5. Technically, the next supports lie around 7450-7500 if the current range were to give way. Resistances remain at 7850, 7950-8000.

6. Sugar sector seems to be in a sweet spot with the production of sugar set to fall. There is no corresponding dip in the consumption.

7. Capital goods is another sector which will do well after years of recession.

There are currently few IPOs there in the market and there can be listing gains on the same. With the new SEBI norms that all Retail Applicants will be treated on par, that is if you apply for 1 lot or 10 ots, you will be allocated only 1 lot, it makes sense to apply for only 1 lot.

Sunday, May 1, 2016

ICICI Bank Results show the Risks of NPAs

The week was flattish for the markets as the markets continue to stall around the 8000 levels. ICICI Bank declared its results after market hours on Friday and which were disappointing to say the least.

1. ICICI Bank increased provisioning for NPAs and this led to a decline of 76 % in its profits. The executives of the Bank will also forgo bonuses for the year. Steel, power and cement sectors could have more NPAs.

2. The ICICI Bank results underline the fact that the Indian economy is not out of the woods and the financial sector could face more stress.

3. Bank of Japan refused to extend Fresh Stimulus to the markets and that will lead to less hot money pumping up emerging markets like India.

4. The FIIs were net buyers of only about 3000 crores compared to 24000 crores in the month of March 2016.

5. It will take some very strong news to take the markets above 8000. The Parliament is in session only the next week and GST bill does not seem to be on the agenda.

6. Technically, 7950-8000 remain very strong resistances and supports are at 7400-7500 followed by 7250.

7. There are some very good IPOs in the market with Parag Foods coming in the first week of May.

8. The Election Results in May could provide some direction to the markets. The similarities are eerie. In May 2004, 2006, the markets corrected in May on the back of election results and there was no correction in the month of March like this year.