The markets ended the month of July at 11356 an all time high closing. Let us look at the Technical and Fundamental factors which would impact the markets in the month of August
Technicals:
As per Elliot, we could be in a irregular correction, where starting from 11172, a 3 legged correction is progress.
Wave A ended at 11172 - 9952 = 1220 points
Wave B 9952 - 11356 and ongoing, in an irregular up move it can exceed the previous top and go above it and then correct.
Wave C yet to unfold with targets of 10000 and below.
This pullback rally is not a broad based rally and thats supports the thoery it is a corrective rally.
The correction to 10000 and below would be a buying opportunity to a mega rally to about 16000 in the next 5 years.
There are several fundamentals at play out here which support my hypothesis.
Fundamentals:
1. The biggest wildcard is that we are in an election year. Anything can happen in May 2019 and markets hate uncertainty. Markets function only on two emotions fear and greed. In Jan 2018, greed took the upper hand and now it is fear which is taking hold of the markets.
2. The interest rates are rising and that is a bad sign for the equity markets. G Sec yileds near about 8 pc and likely to rise further. Spending picks up in an election year and thats fuels inflation. RBI has to keep hiking rates even at the cost of growth.
3. Global headwinds in the times of Trump and trade wars continue to persist. No one knows how big a fire a small spark can light and whether it can be controlled.
4. With rupee breaching all time highs (69) and acounting, oil imports become expensive, fiscal deficit increases and foreign funds lose out from the markets.
5. One positive is the SIP money from domestic investors. How long it will flow in is the key?
So what do we do?
Book part profits where sitting on huge gains. Accumulate only those stocks you are willing to average at lower levels.
We are as likely to see 9700 as we are to see 12000. A pre election rally seems unlikely to me.
Technicals:
As per Elliot, we could be in a irregular correction, where starting from 11172, a 3 legged correction is progress.
Wave A ended at 11172 - 9952 = 1220 points
Wave B 9952 - 11356 and ongoing, in an irregular up move it can exceed the previous top and go above it and then correct.
Wave C yet to unfold with targets of 10000 and below.
This pullback rally is not a broad based rally and thats supports the thoery it is a corrective rally.
The correction to 10000 and below would be a buying opportunity to a mega rally to about 16000 in the next 5 years.
There are several fundamentals at play out here which support my hypothesis.
Fundamentals:
1. The biggest wildcard is that we are in an election year. Anything can happen in May 2019 and markets hate uncertainty. Markets function only on two emotions fear and greed. In Jan 2018, greed took the upper hand and now it is fear which is taking hold of the markets.
2. The interest rates are rising and that is a bad sign for the equity markets. G Sec yileds near about 8 pc and likely to rise further. Spending picks up in an election year and thats fuels inflation. RBI has to keep hiking rates even at the cost of growth.
3. Global headwinds in the times of Trump and trade wars continue to persist. No one knows how big a fire a small spark can light and whether it can be controlled.
4. With rupee breaching all time highs (69) and acounting, oil imports become expensive, fiscal deficit increases and foreign funds lose out from the markets.
5. One positive is the SIP money from domestic investors. How long it will flow in is the key?
So what do we do?
Book part profits where sitting on huge gains. Accumulate only those stocks you are willing to average at lower levels.
We are as likely to see 9700 as we are to see 12000. A pre election rally seems unlikely to me.
