BREXIT, REXIT what next?

Both the events which would have negative impact on the markets happened. First REXIT and then the BREXIT. BREXIT was unexpected and let us see how it pans out.

1. Typically, my experience in the markets states that if there is a sell off on a Friday it continues and peaks on a Monday. So, in all likelihood the fall will continue on Monday.

2. This is a very good buying opportunity for all those yet to buy and for those who have booked profits. We could be correcting the move from 7715 to 8295 or the entire move from 6825 to 8295.

3. If we are correcting from 7715 to 8295, the targets are 7940 (already achieved), 7860 and 7805. Below 7805 we are in for a deeper correction. So, 7805 one should ideally finish 50% of the buying to be done.

4. Now if we are correcting whole move from 6825 to 8295,  the targets are 7849, 7653, 7495,7337 and finally 7100.

5. The monsoon session will start sometime in the third week of July and GST seems to be likely to be passed by then. If that happens, then there will be another big rally in the making.

6. BREXIT impacts are still 2-3 years down the line. First the UK Government has to trigger clause 50, 2 years after which the divorce will be complete. PM Cameroon is talking about letting the next PM do that so that will not happen before October 2016 at the eariest. The exit will happen towards late 2018. In the meantime, UK will have to come up with trade agreements with other countries to replace the existing ones.

The Results month is typically a range bound month. So, expected limited immediate upsides, some correction and sideways movement. This is a very good buying opportunity.

REXIT is here. what about BREXIT?

Well, Governor Rajan shook up everybody on a somnolent Saturday by stating he will not be in office for a second term. The poster boy whom everyone wanted will not continue and this will have a sentimental effect on the markets.

1. Markets are driven by human sentiments and emotions. I expect a short term reaction from the markets before stabilizing. 1 major event is out of the way and kudos to Mr Rajan were not keeping the issue hanging in fire till September.

2. The next issue is the British referendum on whether to remain in the European Union on the 23rd June. If this happens, then UK may split with Scotland seeking its own independence.

3. If the BREXIT happens, then we may see the 7500-7800 band being tested and which will be a buying opportunity. Even the dip arising from Rajan exit will turn out to be a very good buying opportunity.

4. The FIIs were sellers 3 of the 5 days and their support is needed for the markets to move higher.

5. The Mahanagar Gas IPO is coming next week and it is a very good IPO to subscribe to.

6. Technically, the markets are pausing after a sharp up move and now would be a good time to add stocks.

7. The GST Bill seems to be almost sure to be passed. So, after the BREXIT event we have a potentially positive event lined up.

All in all, every dip which would be presented next week will be a very good buying opportunity.

Every Dip is a Buying Opportunity

The markets reacted from the strong resistance zone and have begun to correct. If the correction persists, it will be a very good buying opportunity. One would now find the mid caps rallying while the large caps will cool off a bit.

1. The FIIs have continued to be buyers for every day of June. DIIs are sellers and the support is there for the markets to avoid a drastic fall.

2. The poor IIP numbers may lead to the minor correction continuing in the early part of the next week.

3. Technically 8114 and then 7950 - 8000 are strong support zones. A cooling off is healthy and required for the markets.

4. The RBI policy as expected was a non event for the markets. Rates were kept unchanged and unless more rate cuts are transmitted to end users, this will continue.

5. The next event coming is the supposed exit of Britain from the EU, Brexit as it is called on the 23rd June. If that happens, the global markets will collapse.

6. Domestically, other than confirmation of the monsoons, there are not many triggers in the immediate future for the markets to react.

7. Technically, the markets have reacted from a resistance zone and are expected to retreat to a support zone before the next leg up.

One will now see action shifting from the front line stocks to the mid caps. The index will take a breather while the cash shares do well. Even for the correction from November 2015 to Feb 2016, the cash shares or the mid caps started correcting only in the month of Jan 2016.

Rains, Rains waiting for the Rains

All the positives are priced in the markets and we are in a resistance zone. Let us see what course the markets take next? Markets are poised interestingly.

1. The zone between 8250 and 8350 is a strong resistance zone. Any moves above this will open the flood gates for 8600-8700. I have reached several conclusions since the end of February bottom.

2. The bottom seems to be conclusively in place for now. There could be a correction to 7900-8000 levels but that should be a buying opportunity.

3. This markets is headed to fresh new highs in the next 12 months. A god monsoon itself should see it propelling towards fresh highs.

4. The RBI policy on Tuesday is a non event and may be a trigger for mild correction. I expect  status quo to be maintained.

5. The rains are supposed to hit Kerala in the next couple of days and the progress of the monsoons will be closely watched.

6. The Brexit, that is UK leaving the European Union and others are all in the distance towards 23rd June.

7. Politically, the GST seems to be closer to passage then any time before. 2 things have changed. The number of Congress MPs have reduced and second is Jayalalitha may join the Government. This will make a huge difference to the GST bill. Mamata Banerjee has already indicated support for the GST bill.

The markets have rallied and rallied strongly proving all naysayers wrong. The tone has changed from sell on rises to buy on dips. Let us now join the rise up, and make money.

I hope many subscribed to the Mahindra Finance NCDs. The issue closed in 2 days and was oversubscribed 4 times with option to keep all the money. I expect the allotment to be done in the next 2 days.