Budget 2019 and its implications

Another budget came and went. This has significant implications as it is a forward looking budgets. Those looking for immediate results are likely to be disappointed.

1. The Model Rent Act is a big step forward. due to archaic laws people are hesitant to rent out homes. This will help the infra space also.

2. The hike in excise on Petrol and diesel is significant as it will help flush out black money. Even the non tax payers fill petrol and diesel so everyone pays taxes.

3. Lowering of promoter holding to 65 % will bring liquidity especially in the MNC stocks. It will lead to more participation by the retail population.

4. Borrowing in foreign currency will strengthen the rupee and keep interest rates low.

This budget is the first step in the long term roadmap towards the 5 trillion dollar economy mark. The markets will react negatively initially but over the long term it is a buying opportunity.

The time to invest in good stocks is now and they will reward investors over a 5 year period.

11300-11500 can be considered as the base for the markets. The patient investor will be the one who will be rewarded.
 

Markets in Modi 2.0

The NDA and the BJP have won a resounding victory in the Lok Sabha elections. So, let us try and explore what the market dynamics will be going forward?

1. A strong government for the next 5 years means that economic reforms will continue to be carried out.

2. In Rajya Sabha, the NDA will get a majority by the end of 2020. This will further ease the passage of various reform measures.

3. Blue chip companies will be the way forward. safe returns will come from such stocks and the market caps of Indian companies will grow multi fold.

4. In the next 5 years, expect at least 5 companies to have a market cap of Rs 10 lakh crores.

5. with the focus on Infrastructure, infrastructure related stocks will do very well.

6. For any economy to grow, banking and the finance sector will have to do very well.

7. Consumption driven themes will continue to do very well.

Keeping all this in mind and with intermittent corrections, a peak of 16000 nifty is very much possible in the next 5 years. an upside for the nifty of 33 pc and for individual stocks multi bagger returns.

Market Analysis for April 2019 - 2

The markets closed up approx 1 pc to just below 11760. Let us look at the factors moving the markets.

1. The corporate results coming in are good. Heavyweights like Infy, TCS and HDFC Bank have posted good results. This is supporting the markets.

2. The FII flows in anticipation of Modi winning are robust. This is helping the markets move up.

3. The markets are now very close to the psychological level of 12000. Markets tend to correct from such milestones like they corrected last year from 11172.

4. Technically, on the weekly scale the RSI has scaled almost reached a reading of 70 which usually triggers some correction.

5. Right now, till May 23 I expect the markets to maintain a range of 11500-12000.

6. The monsoons have been predicted to be normal by IMD. Skymet has predicted below nrmal monsoons.

Overall a dull period for the markets, waiting for the outcome of election results. The markets seem to be factoring in all the good news. Any disappointment on the election or monsoon front will lead to correction.

Market Analysis for April 2019 - 1

Posting after a break and if we refer my last post of September 2018, the post was pretty much correct in terms of correction. We had a good 15 pc correction.

The correction was from 11760-10004.

In today's post, I would like to focus on the post election scenario and how things can play out.

A very key indicator is the P/E ratio for the markets. Anything above 25 is perceived as a bubble territory.

The current P/E is 29.13 and the index is at 11643. This also means that with every 400 points movement in Nifty the P/E increases by 1.

Let us look at this old chart I have posted.

https://money-manthan.blogspot.com/2009/08/2-of-most-important-and-basic-analytic.html

This means we are in bubble territory already.

Now, there can be 3 scenarios post elections:

1. A Clear BJP Majority in which case there will be euphoria and we can expect the markets to go up another 1000 points or so. A top can be expected around 12500.

2. NDA win with a weakened majority. In this case, a correction can be expected. We can expect 10000-10500.

3. Unlikely but possible,opposition lead coalition. This would initially lead to a sharp correction much like in 2004. This will take us back to 9000-9500.

What is the bottomline in all this? The earnings have to catch up with the Nifty. In the best case scenario also there is limited upside and it would be prudent to book profits if not before elections but definitely post elections.