Range Breakout likely

It was another flat week for the markets. The markets have gained a mere 6 points on the Nifty since April 11th on a closing basis. The range bound trading will lead to a breakout or a breakdown in the coming week.

1. The coming week is another truncated week of trading with may 1st being a holiday.

2. The markets seem to be stalling in the 6800-6850 band of trading. since, 6350 is a multi year breakout, the markets will be positive till they hold this area.

3. The FII buying continues but at a much reduced pace. The corporate results are also in and there are no major triggers till the election results.

4. April was predicted to be a range bound month and it has proved to be so.

5. The supports remain the same as mentioned last week, 6610, 6480, 6380 and the markets will be firm sustaining above 6819. This week, the markets could not sustain fresh highs and therefore tanked towards the end of the week.

6. Nothing much is happening in the markets and it is time to be patient waiting for the results of the elections.

7. If a poor monsoon materialized, the sugar stocks could be in focus. my favorite is KCP sugar trading around Rs 19 and giving a dividend of 70 paise. This has been a regular dividend paying company for past several years.

The trick would be to focus on strong dividend paying companies, so that you can hold on, if the markets tank post the results. Live on the dividends and average out the stocks at lower prices.

Truncated Week brings a flat market

It was a short trading week with the markets being in the negative for the first 2 days and making up the losses on Thursday. The highlight of the week were the IT Results.

1. The IT companies posted pretty decent set of results lead by TCS. This lead to a spurt in the IT stocks and the markets. As mentioned earlier, the IT stocks can act as a hedge for a BJP defeat.

2. The FIIs were net sellers on Tuesday ad Wednesday and were buyers on Thursday. The pace of flows has slowed down. In April, they have bought only 4000 crores so far as compared to 25000 crores in March.

3. Reliance results after markets hours on Thursday were ok meeting expectations.With a 3 year perspective, RIl becomes a buy now.

4. Next week is a truncated week with expiry on Wednesday and Thursday being a election holiday. The supports mentioned last week stand and are 6610, 6480 and 6376. If the market crosses and sustains 6819, then we may see new highs.

5. I have worked out certain post poll scenarios, which I would publish on Wednesday.

Net-net, no change from last week, buy on dips and wait for May 16th continues.

Range Bound Market in the first 2 weeks of April

The markets have gained 1.1 pc for the first 2 weeks of April. The broader market is catching up and the front line stocks are taking a short breather.

1. After a blockbuster rally in March, April was supposed to be a range bound market and so far it has played true to form. In March, the FIIs bought almost 26000 crores worth of stocks and in April the figure has been only 3500 crores with the FIIs having sold stocks on Friday worth 362 crores.

2. The markets have crossed the multi year top of 6350 and sustained above it now for 6 weeks. This now becomes a major support and the market should test this support once before May 16th.

3. The targets for the correction remain 6610, 6480 and 6376.

4. Infosys results are on April 15th and will be keenly watched. Markets tend to correct around the Results season and lets watch out for that.

5. Next week, the markets trades for only 3 trading days. the likely range at the beginning of the month was stated to be 6400-6900. we have tested 6819 and now maybe the time to test 6500-6550.

6. The Gilt fund yields have cooled down a bit to 8.95 % and the Gilt funds may give a good return if the interest rate cycle dips.

We are in a bull phase now and every dip is a buying opportunity to be either hedged at the time of election results with puts or part profit booking.

Buy on dips Strategy continues

The markets closed absolutely flat for the week and the FIIs continued to buy. The markets displayed some very strange behaviour this week but which also implies bullishness.

1. The markets took a dip towards the end of the week. Logically, the Puts should have shown an increase in value where in fact they lost money. The markets corrected 80-90 points from the top and the Puts lost money. I am seeing it for the first time in my life except for event related days.

2.April is a slow month as there are 4 trading holidays.

3. The opinion polls are predicting BJP win which will ensure that markets remain buoyant till the elections results are out.

4. The yields have again shot up, good time to add Gilt funds.

5. Targets for this correction could be 6578, 6456 and 6355. Beyond this I do not see the markets correcting further before the elections.

6. In Diwali Picks I had recommended Godrej Properties at Rs 370 post split at Rs 185 it is now at Rs 225 and Larsen at around 1000 which is now around rs 1300.

Larsen is a good proxy for the markets. If the markets move up then Larsen has to go up.

April seems to be a leisurely month. Buy on dips and wait for the election results.