Sunday, July 28, 2013

RBI Policy on 30th July to determine short term movement

The markets declined about 2.4 pc to close the week in the red. This was on the back of RBI further tightening the interest rates to prop up the rupee. This led to the banks tanking and taking the markets down with it. The Markets are at an interesting point right now.

1. The current rally from 5566 to 6093 has been led by FMCG, Pharma, IT and Oil and Gas Sector.The banks have taken a substantial beating. The Bank Nifty has corrected around 20 pc from its peak where as the Nifty has corrected only about 5 pc from the top.

2. This now leaves with 2 possibilities.

a. The Top is in at 6229 and we face a long grind down to 4000-4300 levels.

b. 1 more up move is pending to top around 6500-7000 before the grind down.

For the Bullish probability to come true, the Banks need to rally. Any further bad news on Tuesday and it is the end of the road.

3. If this is just a correction, then the markets should pause at 5829, 5767. A fall beyond 5671 will terminate the entire rally.

4. The market is touching a cluster of supports between 5820-5860. A bounce from here can face a resistance at 5950-6000 range. A move beyond 6050 will suggest a resumption in the up trend.

5. Fundamentally, a  good monsoon, reduction in Gold imports are all good signs. The Electoral uncertainty remains.

Now, is the time to be cautious and do only selective stock based buying. Stick to good quality stocks with ample liquidity.

Sunday, July 21, 2013

Markets Continue to Tease

The Markets had a roller coaster ride last week. Nifty ended with a net gain of 20 points for all the twists and turns.Let us see what the markets have in store for us.

1. The RBI hiked interest rates in a surprise move on Monday to prevent the rupee from collapsing further. This led to the 10 year yield spiking up from 7.5 % to 8.1 %. By the end of the week, the yield had come down to 7.94%. This is a golden chance for those seeking to invest in Gilt funds as over a period of time, the rates have  to come down for the economy to improve. Over a period of few months, all the losses would be recouped. What happened on Monday was a Black Swan event.

2. The Results of TCS, Axis Bank and Reliance have been good. The Good Results are always declared early and we may have come to an end of the above average results.

3. Nifty fell from 6229 to 5566. 6100 is the key level if the market is able to sustain above it then we may reach new highs. The Markets like to tease everyone hence we may overshoot 6100 slightly or have a small correction before decisively taking out 6100.

4. Last week was a study in Index Management. 1 day the IT stocks held up the markets, the next day FMCG stocks held up the markets. The broader markets were declining which leads one to beleive that a small correction can set in.

5. The FIIs have pulled out 1 billion USD from the equity segment and 1.8 billion USD from the Debt markets in the month of July. Till this trend reverses, markets will not make new highs.

6. The money is moving towards the defesives like FMCG ad Pharma which continue to make new highs while the rest of the market flounders.

7. The Banking stocks have been shattered in the last week, but the index has moved higher. If these stocks recover, then new highs are a given.

8. Gold continues to drift aimlessly and is a clear avoid at this stage.

9. If the up move was just a corrective up move to fall from 6229 to 5566, then it should terminate in the next week.

The Strategy remains to buy on dips especially the Banking stocks closer to 5900. One could also wait for 3-4 closes above 6100 to buy.

Sunday, July 14, 2013

Markets at Cross-Roads

The markets gave a breakout last week. It closed up by 2.4 pc over the previous week. So is the worse over for the markets? Let us try and explore this week.

1. The markets if they were correcting the down move from 6229 - 5566, then a 3 legged move was on.

Leg A 5566-5904
Leg B 5904 - 5760
Leg C 5760 or 5802 and ongoing.

If this is just a corrective up move then max, it will top out around 6100-6115. Ay move above this will lead to breakouts and new highs.

2. The FIIs have stopped their large sales and have small sale figures or net buys. If this continues, then we can expect new highs.

3. The Result season will be on next week with TCS and the Private Banks Results coming in.

4. Supports come in at 5935 - 5951. Also, 5840 and 5790 are other supports.

5. The Fed has given indications that the liquidity will continue for the next 6 months. This may lead the rally to continue.

The Strategy is to buy if markets sustains above 6100. The wait and watch strategy continues till we get clear indications from the markets.

Sunday, July 7, 2013

Trapped in a Range, awaiting the Results season

The Nifty gained just 25 points or 0.4 pc for the week. There was an absence of major triggers for the markets. The next cue will be from the Q1 Results which will be kicked off by Infosys next week.

1. The markets are correcting the up move 5566 to 5904. This is a corrective down move featuring 3 legss.

A - 5904 - 5760
B- 5760 - 5900
C - 5900- ???

This could be anywhere in the range of 5760 to 5677. The supports come in at 5735 and 5695.

2. Typically, in the first 2 weeks of the months, sometimes the markets are kept range bound so that the premium is eaten up by the Option Writers.

3. HUL open offer helped the company to raise the stake to 68 pc rather than the targeted 75 pc. This is a vote of confidence in the HUL stock by its Management and in the longer term 600 may act as a floor for the stock. In the shorter term, the stock may come down to 520-550 levels.

4. Infosys results are due on July 12th which is Friday. The Results may be subdued. This is the first time, the Results are being declared after Murthy joined back on 1st June. The Street would be watching for future guidance from the Management rather than the current Results.

5. The 10 Year G-Sec Yield is now back up to 7.5% and this is a good opportunity to add up on G-Sec funds. I expect a return of around 10 pc from these funds in  the next 1 year.

6. Gold continues its downward spiral. Gold is 1 asset class which I would avoid for the next 6 months.

7. The FII selling has also stopped. Even though they are not buying huge quantities, the selling has stopped.

In a nutshell, a quiet phase in the markets. It is also a time to accumulate good quality stocks.