May 23: Election Results played out as usual

 The Karnataka results are out and as expected the Congress has won the elections. I had predicted that the markets would do well till May and here we are a rally of about 1600 points on the Nifty. What lies next for the markets?

1. After the Karnataka elections now there will be people clamoring saying that the BJP is finished. 1 swallow does not make a summer. There would be elections at State level but Modi Government remains set for third term in 2024.

2. The monsoon forecasts do not look too good and that should cap a runaway rally in the markets. The monsoons have been good for at least the past 4 5 years and now right now a poor monsoon is on the cards.

3. The markets have rallied about 1600 points from the bottom in Jan Feb and are now within touching distance of previous highs. A correction is round the corner.

4. The recession has started in US and huge layoffs in IT companies in the US and in India are also muted pay hikes. The sentiment has been damaged. when the sentiment is damaged, people start spending less money. It is a self fulfilling prophecy.

5. We have come to the end of the rate hike cycle and that should bring relief to the home loan folks.

The markets should correct and that gives us a chance to reflect on what next to be done.

April 23: Markets should still rally

 The month of March has come and gone. The Markets were down by about 1.5 pc. This is the 4th month in a row markets have closed negative, Let us see what April has in store.

1. By law of probability, 5 red monthly candles have almost never happened. So April should be a positive month. The market has been oscillating around the 17000 mark.

2. The US Bank crisis should blow over. Inflation is rising and it is a localized issue. Interest Rates India should also rise by 25 basis points.

3. The Karnataka elections in May and results on May 13th will be a trend decider for the Indian markets. Till then the markets should rally.

4. In times of uncertainty, Gold always rises and Gold will do well.

5. The Indian markets have shown great resilience in times of global uncertainty so I expect them to do well and at least reach 18500 if not higher.

6. The Ukraine crisis will again come to a boil with Spring here and a fresh offensive being readied for a launch.

If I was an Indian investor, I would lock into high interest rates, focus on my short term debt portfolio, avoid equity markets and book profits in the existing portfolio.

March 23: Markets likely to rally

 The budget has come and gone. The Adani saga also seems to be settling down, What does the month of March hold for the Indian Equity Markets? Let us try and explore.

1. Last 3 months the markets have fallen and a relief bounce of 8 - 10 pc is on the cards. 18500 to 19000 is the range we can expect if the market rallies. If the markets do not correct in Jan to March period, then May we have a bigger crash.

2. The real election results will be the Karnataka ones in early May. I see it very difficult for BJP to win. The current infighting, an ineffective Chief Minister coupled with JDS and a strong Congress in Karnataka.

3. In 2004, the Lok Sabha results were a a similar trigger.

https://www.rediff.com/money/2005/jan/12market.htm

4.  The weather forecast is not too promising. Hot summers followed by a poor monsoon means we are heading towards a deficient monsoon. We are also entering a period of election results. Nov 2023 has 3 other states MP, Rajasthan, Chhattisgarh where again Chhattisgarh is a lost cause.

The Risk reward ratio becomes unfavorable above previous all time highs. At 16K it becomes favorable.

To summarize next 2-3 months, I am bullish but bearish in the longer term.

Let us evaluate in the first week of April which way we are headed.

Feb 23: Decoding the Budget and the Adani saga

 As promised, restarting the blog after a sabbatical. My goal will be to publish it on a monthly basis at least. Let me start off with trying to decode 2 of the hottest events currently namely the budget and the Adani saga.

First of the budget:

1. The budget is a non event in most years and this year the main talking point was the sops given in the New Tax regime. Leaving the numbers aside, let us look at the big picture. The rightly stated goal of the Government is to do away with complex tax exemptions and simplify the tax process. For example till a few years ago we were submitting medical bills of Rs 15000 to get the exemption till the Government gave it to everybody scrapping the cumbersome process.

Similarly it will be better to scrap the home loan exemptions and straightaway give the benefit to everyone who buys an affordable home. When I as a middle class person bought an affordable home in 2015, I was pleasantly surprised to be given a tax refund of 2 lakhs at the time of possession by the Tatas in 2020 because the Government gave them the benefit.

The Old Regime will be sunset in a few years and only the new Regime should exist.

2. The second point which everyone missed was increasing the Senior Citizen Scheme limit to Rs 30 lakhs from 15 lakhs. While this is laudable, the rates of 8.1 pc are too low. The original rate of 9.3 % was correct. It is too much to expect people in the evening of their life to gamble in the markets. This anomaly needs to be addressed.

Rest all are policy issues and have almost no bearing on our day to day life just good entertainment.

Next is coming to the Adani saga:

1. It is purely a commercial short selling attack as very common in the US. As per the pro and anti Adani camps various stories are being embellished. Remove the outer layers and few things stand out.

a. The stock prices in PE terms are overpriced at 200 and 300 PE

b. Adani groups how solid assets like airports, ports, power distribution which have solid moats around them. So, the in the years ahead, the PE multiples will shrink as the profits catch up.

c. Such projects have long gestation periods and when they start spewing out cash, they become cash cows.

d. The correct PE to buy is 20 to 30 multiples for the kinds of businesses Adani is in.

It is best to cast away the hype and focus on the fundamentals. I assure you that is a very good way to get sound sleep at night.

So, enjoy the dramatics, focus on fundamentals and sleep well at night.

I feel the markets should do well till May. Let us see.

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