GST and Progress of Monsoons to be watched

June has so far been a boring month for the markets. The indices have moved in a very tight range. Mid caps have corrected quite a lot. The next triggers for the markets are the Monsoon progress and the GST implementation.

1. The progress of the Monsoons by the end of the month will be closely watched for its impact on the markets. The positives have all been factored in.

2. The date for GST rollout has been set for July 1st and anything more than teething troubles will be taken negatively by the markets.

3. Globally, the rate hike by the Fed has taken the rates to 1.25 %. What no one realizes is that higher the rates go in the US, lesser is the cushion for a rate cut in India.

4. Globally, there do not seem to be any major negative triggers and that is 1 reason the markets are in a somnolent range.

5. The markets have risen from 7893 to 9700 levels without any major correction. The maximum the markets have corrected is 200 points. A correction of 500-600 points will come at some point of time.

6. Trump seems to have settled down in the US. So, negative triggers reduce from the US. He always will be the unpredictable wild card.

Strategy remains to buy on dips with periodic profit booking.

Mid caps the focus now

The Nifty continues to go up slowly but steadily. The real story is in the midcaps where there are bigger swings. Many corrected about 20 pc or more when the index corrected barely about 2 - 3 pc.

1. The mid caps which one can look are the mid caps which will become the large caps tomorrow. The real cream is in these stocks.

2. To quote an example. a food retailer which had listed in March corrected about 20 pc from the top before resuming its upward journey.

3. The sectors which will do well now are Capital goods, consumption driven themes, housing finance companies. private banks.

4. The markets may correct in June. In all this talk of rally, there is a good 400-500 point correction pending. So far all corrections are limited to 200 points.

5. The GST rollout in July 1st will be the next big thing. It should go through smoothly with niggling teething troubles.

6. Mid caps which are high growth, low debt should be the focus areas.

7. Pharma stocks represent a long term buying opportunity. Every dip is a buy.

When Nifty corrects. the mid cap correction will be magnified and that is the time to buy.