It was an action packed F&O expiry and a one way journey down. There are several interesting observations to be made which may suggest the entire rally from March 09 bottoms may be over.
1. The trend line joining the lows from March is broken decisively on weekly and daily basis.
2. The FIIs and DIIs were net net on the sidelines for the month of October. Both were almost net zero in terms of money pumped.
http://www.bseindia.com/mktlive/market_summ/categorywise_turnover.asp The BSE link from where I got the data.
This means that DII turned neutral to negative since August and now the FIIs have joined the same view. This makes November very critical.
3. Even though the market has corrected 7-8% from the tops, many stocks have lost much more, indicating a brutal market wide sell-off.
4. On the basis of 5 week Ema which comes to 4903, we have decisively broken it for the first time since March'09. This is the second weekly close below 5 week ema.
5. The 50 day ema was broken without much ado around 4850. The next support comes around 4600 odd levels.
6. The heartening thing to note was that both FII and DII were net buyers on Friday to the tune of 500 odd crores each. In spite of this the markets fell. Maybe a bear trap for shorters.
7. The Dow closed down 250 points on Monday nut it has also reached the oversold levels and a bounce is expected.
8. The RSI(14) is at 31. This is at lowest levels since March and in the oversold levels. A bounce ca be expected any month. Till 50 EMA is decisively taken out, I would use rallies to short.
9. The RBI credit policy with a hike of 100 basis points is a good step. RBI is ahead of the curve. Better pain now, that a bubble being created.
10. The US GDP growth of 3.5% is largely due to the cash for clunkers scheme and fiscal injections.
Conclusion: Those who have booked out, enjoy the fall and be ready to buy at lower levels. The rises can be used to get out. Those who have missed out the fall as a shorting opportunity, the first fall is always difficult to catch. I would wait for a confirmation of a second weekly close below 4900.
Sunday, November 1, 2009
Saturday, October 24, 2009
Critical Week Ahead
The markets hit a high of 5182 on the nifty before closing the week at 4997. This was a very interesting week, and the week that follows will tell us whether the entire rally which started from March is over or just a small dip. There were several differences this week over the previous 7 months.
First, the FIIs were huge sellers on last 3 days. They pulled out almost 1500 crores whereas DIIs pulled out 80 crores. I went back and checked. The DIIs have bee net sellers over August, Sept and Oct. In July they were marginal buyers.
This means the entire rally from July, post budget has been on FII flows. This week FII liquidation could be because of Galleon and Lehman forced liquidation or something else. If it was only a forced liquidation, then we should be ok.
Second, Nifty closed at 4997. The 5 week EMA was at 5000, and it has closed below it. This is only the second time in 7 months it has done so.Hence, for the bull run to continue we should close above 5000 next week. All the max open interest is at 5000 strike price for Oct expiry. So we should be somewhere around this by Thursday with a negative bias as there are more calls than puts written at 5000.
Thirdly, we have closed below 20 EMA from which we have taken support many times. 50 EMA comes at 4853 which becomes a key level to watch. Closing below this level for 3-4 sessions, then all bets are off.
UK recession continues. Longest recession since they started keeping records. In US, the corporate results were better than expected. The main thing is profits have increased but not the sales to the same extent. The increased profits come on the back of cost cutting measures. But you can cut costs only to an extent.
Lets see if the entire upmove from March is over and we begin the next leg of downmove or the uptrend is intact.
Over the longer term, I am bullish on sugar, gold and Telecom (Bharti).
First, the FIIs were huge sellers on last 3 days. They pulled out almost 1500 crores whereas DIIs pulled out 80 crores. I went back and checked. The DIIs have bee net sellers over August, Sept and Oct. In July they were marginal buyers.
This means the entire rally from July, post budget has been on FII flows. This week FII liquidation could be because of Galleon and Lehman forced liquidation or something else. If it was only a forced liquidation, then we should be ok.
Second, Nifty closed at 4997. The 5 week EMA was at 5000, and it has closed below it. This is only the second time in 7 months it has done so.Hence, for the bull run to continue we should close above 5000 next week. All the max open interest is at 5000 strike price for Oct expiry. So we should be somewhere around this by Thursday with a negative bias as there are more calls than puts written at 5000.
Thirdly, we have closed below 20 EMA from which we have taken support many times. 50 EMA comes at 4853 which becomes a key level to watch. Closing below this level for 3-4 sessions, then all bets are off.
UK recession continues. Longest recession since they started keeping records. In US, the corporate results were better than expected. The main thing is profits have increased but not the sales to the same extent. The increased profits come on the back of cost cutting measures. But you can cut costs only to an extent.
Lets see if the entire upmove from March is over and we begin the next leg of downmove or the uptrend is intact.
Over the longer term, I am bullish on sugar, gold and Telecom (Bharti).
Friday, October 16, 2009
Diwali Picks
It is Mahurat trading time. We have picked up certain stocks which we feel will do if the markets do well.
Also, it is a time of caution, as P/E of nifty is around 23. A staggered buying approach would be good.
I would also like to thank Lakshmi Ramchandran for all the efforts and encouragement put in to make this presentation a reality.
Please check out the presentation here:
http://groups.google.co.in/group/nav-files/web/Diwali%20Picks2009v1.0.pdf
Also, it is a time of caution, as P/E of nifty is around 23. A staggered buying approach would be good.
I would also like to thank Lakshmi Ramchandran for all the efforts and encouragement put in to make this presentation a reality.
Please check out the presentation here:
http://groups.google.co.in/group/nav-files/web/Diwali%20Picks2009v1.0.pdf
Sunday, October 11, 2009
Markets: Amber signs flashing, but not Red Yet
It was a day trader's paradise this week at the bourses as the markets oscillated.
Key events were the dumping of Telecom Stocks, Infy results and Reliance bonus announcement of 1:1. Reliance came out with a bonus issue which surprised the markets but there was no reaction from the markets. An intra- day spike of 6 pc and thats it.
The markets typically hail a bonus issue which is nothing but a sentiment booster for the Retail. Eventually after a month or so after the bonus announcement you get the stock cheaper. An example of this was the Siemens stock last year.
Infosys as usual delivered a good set of number. Their Eps of Rs 100 for this year puts it at a P/E of 22. Not cheap for a stock where there is no growth year on year. The P/E to growth ratio the thumb rule is that it should 1.
Fair P/E for Infy I would put it in the range of 15-17 giving it a valuation of 1500 to 1700.
The most shocking was the dumping of the Telecom sector stocks following a price war announced by Reliance and TRAI declaring a discussion per second billing. Bharti lost almost 25 pc to end around Rs 343. The institutions follow a herd mentality in dumping stocks. I would accumulate Bharti for the simple reason it has 110 million subscribers out of 443 million in India. It has submarine cables and landing stations i key cities.
Bharti is an integrated telecom player and with 3 G, data communications would be another major play. Voice would be just 1 plain vanilla low end offering to entice the customer. The idea is to lock in a subscriber and use his mobile to be his gateway for payments, accessing the net and even his supermarket.
I would not be surprised if free voice calls upto a limit are offered if an user goes in for data solutions from a vendor.
The FII flows seem to be pausing, with the dollar weakening. A weak dollar means for fresh inflows, 1 dollar can buy less amount of stocks. Good news for existing investors as they can exit the Indian stocks with more dollars.
Nifty ended at 4945. It has a cluster of supports. It is at the trend-line joining lows since March 2009. 20 EMA is at 4935. If it breaks this next support comes around 4750.
Nothing is impossible but next week it seems it would be tough to touch 4750. My reasoning is simple. A truncated week with a holiday on Tuesday. Indiabulls Power IPO closing on Thursday means the market will remain shored up at least till Wednesday afternoon or even Thursday.
Look at the put-call spreads, 5000 is a key pivot. Almost same number of puts and calls have been written around this mark. So, its in the interest of the option writers that the markets revolves around 5000. Thats what has been happening last week, and option writers have been eating the premiums.
4800 and 4900 have huge OI in Puts ad would act as strong supports. They will not break easily. 5100 and 5200 calls have good OI build which would be resistance points.
Looks to be a range bound week.
Key events were the dumping of Telecom Stocks, Infy results and Reliance bonus announcement of 1:1. Reliance came out with a bonus issue which surprised the markets but there was no reaction from the markets. An intra- day spike of 6 pc and thats it.
The markets typically hail a bonus issue which is nothing but a sentiment booster for the Retail. Eventually after a month or so after the bonus announcement you get the stock cheaper. An example of this was the Siemens stock last year.
Infosys as usual delivered a good set of number. Their Eps of Rs 100 for this year puts it at a P/E of 22. Not cheap for a stock where there is no growth year on year. The P/E to growth ratio the thumb rule is that it should 1.
Fair P/E for Infy I would put it in the range of 15-17 giving it a valuation of 1500 to 1700.
The most shocking was the dumping of the Telecom sector stocks following a price war announced by Reliance and TRAI declaring a discussion per second billing. Bharti lost almost 25 pc to end around Rs 343. The institutions follow a herd mentality in dumping stocks. I would accumulate Bharti for the simple reason it has 110 million subscribers out of 443 million in India. It has submarine cables and landing stations i key cities.
Bharti is an integrated telecom player and with 3 G, data communications would be another major play. Voice would be just 1 plain vanilla low end offering to entice the customer. The idea is to lock in a subscriber and use his mobile to be his gateway for payments, accessing the net and even his supermarket.
I would not be surprised if free voice calls upto a limit are offered if an user goes in for data solutions from a vendor.
The FII flows seem to be pausing, with the dollar weakening. A weak dollar means for fresh inflows, 1 dollar can buy less amount of stocks. Good news for existing investors as they can exit the Indian stocks with more dollars.
Nifty ended at 4945. It has a cluster of supports. It is at the trend-line joining lows since March 2009. 20 EMA is at 4935. If it breaks this next support comes around 4750.
Nothing is impossible but next week it seems it would be tough to touch 4750. My reasoning is simple. A truncated week with a holiday on Tuesday. Indiabulls Power IPO closing on Thursday means the market will remain shored up at least till Wednesday afternoon or even Thursday.
Look at the put-call spreads, 5000 is a key pivot. Almost same number of puts and calls have been written around this mark. So, its in the interest of the option writers that the markets revolves around 5000. Thats what has been happening last week, and option writers have been eating the premiums.
4800 and 4900 have huge OI in Puts ad would act as strong supports. They will not break easily. 5100 and 5200 calls have good OI build which would be resistance points.
Looks to be a range bound week.
Sunday, October 4, 2009
Sporting excellence a sign of an emerging superpower
The Olympics for 2016 have been allotted to Brazil. Brazil has edged out established cities like Tokyo, Chicago ad Madrid.
Often, when a country is on its way to becoming a economic superpower, it is reflected in the Sports Arena. By this, I mean consistent performances, not a few flashes in the pan, moments of individual brilliance.
Lets take the 1992 Barcelona Olympics. During those games, Soviet Union was at the top with 45 golds followed by USA and Germany. China was just making a small splash in the pool with about 16 golds.
In the 2000 Games, USA had 36 golds, followed by Russia with 32 and China 28 golds. The gap between China and the the top powers was coming down.
Cut forward to the 2008 Games and the performance reflects the new order in the world. China has got 51 gold, USA 36 golds followed by Russia.
There are several reasons for sports mirroring the economic strength of a country. As a country grows prosperous, the surplus funds grow and its citizens get better facilities. Athletes and other sportsmen get world class facilities to practice and are taken care of by the corporates.
China hosted the 2008 Olympics and it was making a statement to the world. We have arrived. We have the best facilities in the world. Our Sportsmen are the best in the world.
As the economic clout of a country grows so do its allies. Brazil was able to edge out even the mighty Obama backed Chicago. Speaks a lot about where USA is heading.
We have the 2010 Commonwealth Games. Lets see what message we send out to the world.
ps: Sometimes, its fun to ignore the markets and look at other angles associated with economics.
Often, when a country is on its way to becoming a economic superpower, it is reflected in the Sports Arena. By this, I mean consistent performances, not a few flashes in the pan, moments of individual brilliance.
Lets take the 1992 Barcelona Olympics. During those games, Soviet Union was at the top with 45 golds followed by USA and Germany. China was just making a small splash in the pool with about 16 golds.
In the 2000 Games, USA had 36 golds, followed by Russia with 32 and China 28 golds. The gap between China and the the top powers was coming down.
Cut forward to the 2008 Games and the performance reflects the new order in the world. China has got 51 gold, USA 36 golds followed by Russia.
There are several reasons for sports mirroring the economic strength of a country. As a country grows prosperous, the surplus funds grow and its citizens get better facilities. Athletes and other sportsmen get world class facilities to practice and are taken care of by the corporates.
China hosted the 2008 Olympics and it was making a statement to the world. We have arrived. We have the best facilities in the world. Our Sportsmen are the best in the world.
As the economic clout of a country grows so do its allies. Brazil was able to edge out even the mighty Obama backed Chicago. Speaks a lot about where USA is heading.
We have the 2010 Commonwealth Games. Lets see what message we send out to the world.
ps: Sometimes, its fun to ignore the markets and look at other angles associated with economics.
Friday, October 2, 2009
P/E:An update
The Nifty P/E is at 22.89 as of 01st October.
It has exceeded these levels only during the bubble crashes of 2000 and 2008. In 2004, it briefly flirted above this level before falling.
We have 2 scenarios now:
1. It keeps rising to about 28 creating a bubble like scenario. It would break the previous high or thereabouts and the a mega fall.
2. Correct from anywhere here to 5200 zone. Every time it corrects, it comes down to a P/E of 14-16 which would be equivalent to 3200-3600 range.
Right now, the liquidity is gushing with FIIs pumping in 1000 crores daily. I have not seen even in the earlier bull run.
We have the dollar carry trade like the yen carry trade with hedge funds borrowing at low interest rates in the US and leveraging these dollars in India.
These positions will be unwound when the dollar strengthens, (it would take more rupees to buy the same dollars invested) or interest rates rise in the US.
The dollex is showing some signs of rebound on Bernanke comments. Interest rates rising in US will take some more time.
Troubles in China or at home in US could reverse the flows.
Time not to invest aggressively and keep taking profits with trailing stop losses. I would keep a stop loss of 4900 for my investments.
Sunday, September 27, 2009
Liquidity Keeps Markets afloat
Lets look at some of the stats for the month of September:
1. Nifty has been 6.34% up as compared to 31st august
2. FIIs have pumped in 10,854 crores in September and DIIs have put in 518 crores in September.
3.For the year from Jan'09, FIIs have put 16300 crores and DIIs have put 23535 crores.
The above Stats say a lot. Out of a total of about 40000 crores pumped in 9 months,11300 crores have come in September which amounts to roughly about 26 pc of inflows yet the market moves up only 300 points as compared to 2400 points from the bottom.
So now in spite of so much buying the market is not moving means someone is selling. The Smart Money is moving out of the Markets.
The FIIs display a herd mentality.Now, if this FII flow were to disappear then there would a stampede towards the exit doors.
The cheap dollar and low interest rates in the US are fueling this fascination for emerging markets. FIIs tend to churn the money around.
China down 18 pc from its peak value, Hong Kong about 4 pc and the Indian markets 1.58 % from the peak.
India story is looking good domestically, the only thing which can spoil the party is global triggers.
The Best option is to keep a trailing stop loss for positions at the 50 EMA which comes at 4658.
1. Nifty has been 6.34% up as compared to 31st august
2. FIIs have pumped in 10,854 crores in September and DIIs have put in 518 crores in September.
3.For the year from Jan'09, FIIs have put 16300 crores and DIIs have put 23535 crores.
The above Stats say a lot. Out of a total of about 40000 crores pumped in 9 months,11300 crores have come in September which amounts to roughly about 26 pc of inflows yet the market moves up only 300 points as compared to 2400 points from the bottom.
So now in spite of so much buying the market is not moving means someone is selling. The Smart Money is moving out of the Markets.
The FIIs display a herd mentality.Now, if this FII flow were to disappear then there would a stampede towards the exit doors.
The cheap dollar and low interest rates in the US are fueling this fascination for emerging markets. FIIs tend to churn the money around.
China down 18 pc from its peak value, Hong Kong about 4 pc and the Indian markets 1.58 % from the peak.
India story is looking good domestically, the only thing which can spoil the party is global triggers.
The Best option is to keep a trailing stop loss for positions at the 50 EMA which comes at 4658.
Monday, September 21, 2009
Markets Tomorrow - Key Levels
I would be putting in key levels for the next trading day for those interested. In case, you find them useful, please let me know so that I would keep posting them here.
5 EMA, 20 EMA and 50 EMA are key support levels. The Bollinger band tops are key resistance levels
BBtop 15, 20 5039, 5000
5DEMA - 4984
5 EMA - 4928
3 EMA - 4956
7 EMA - 4902
10 EMA - 4866
20 EMA -4777
50 EMA -4601
STochs - Buy
MACD - Buy
5 EMA, 20 EMA and 50 EMA are key support levels. The Bollinger band tops are key resistance levels
BBtop 15, 20 5039, 5000
5DEMA - 4984
5 EMA - 4928
3 EMA - 4956
7 EMA - 4902
10 EMA - 4866
20 EMA -4777
50 EMA -4601
STochs - Buy
MACD - Buy
Saturday, September 19, 2009
Markets: How high can they go?
The Markets keep rising. All the prophets of doom and gloom are decreasing. The bears have gone into hibernation.Happy times are here again.
Lets check out the fundamentals. Domestically, the things have improved definitely. Forget the IIP numbers which are overcooked by the government anyway. I look at the Auto Sales numbers as a key measure. Maruti is producing at peak capacity. They are now only constrained by Production limitations.
Indian IT companies are again bagging orders. The freeze is beginning to thaw. Domestically, things are beginning to look bright. My sense is that the next downward trigger will not come domestically unless its a Mumbai style Terrorist Attack. This time, India will not be expected to give a muted response.
Globally, things are seemingly looking up. The US and so the world markets are at new 2009 highs. It seems pumping in cash has done the trick. I will keep a watch at China. They are often the leading indicators of things to come. It seems a dichotomy that Chinese Markets are tanking when Global Markets are partying.
How does China become so important?
They hold a large amount of US Treasury bills, they are largest purchasers of US debt and FIIs for BRIC countries look at China for direction.
The US data looks towards a stabilizing of the job markets. The rate of decline has reduced.
The nifty has gone up 6.75 % in September. This has primarily been due to FII inflows of almost 8000 crores. DIIs have put in just 800 crores. The Party will continue till liquidity keeps pouring.
The FII or the so called smart investors often so a herd mentality. When they stampede towards the exit they do not give an opportunity to exit.The Nifty is at a P/E of 22.31. This is historically where it takes a dip to at least 19.
So what should you as an investor do?
If you are already invested and looking to book profits, keep booking at every rise of say 200 nifty points or keep a trailing stop loss of 20 EMA which stands at 4777 as of yesterday.
If you want to invest money look for dips to buy. Again, one could look at dips to 50 EMA to buy which comes to 4601.
Remember, if the crash comes it will be swift and brutal. So, you will know that it is not time to enter.
The markets had come 50 EMA levels last around 18-19th August, nifty 4353 which was a buying opportunity.
Lets check out the fundamentals. Domestically, the things have improved definitely. Forget the IIP numbers which are overcooked by the government anyway. I look at the Auto Sales numbers as a key measure. Maruti is producing at peak capacity. They are now only constrained by Production limitations.
Indian IT companies are again bagging orders. The freeze is beginning to thaw. Domestically, things are beginning to look bright. My sense is that the next downward trigger will not come domestically unless its a Mumbai style Terrorist Attack. This time, India will not be expected to give a muted response.
Globally, things are seemingly looking up. The US and so the world markets are at new 2009 highs. It seems pumping in cash has done the trick. I will keep a watch at China. They are often the leading indicators of things to come. It seems a dichotomy that Chinese Markets are tanking when Global Markets are partying.
How does China become so important?
They hold a large amount of US Treasury bills, they are largest purchasers of US debt and FIIs for BRIC countries look at China for direction.
The US data looks towards a stabilizing of the job markets. The rate of decline has reduced.
The nifty has gone up 6.75 % in September. This has primarily been due to FII inflows of almost 8000 crores. DIIs have put in just 800 crores. The Party will continue till liquidity keeps pouring.
The FII or the so called smart investors often so a herd mentality. When they stampede towards the exit they do not give an opportunity to exit.The Nifty is at a P/E of 22.31. This is historically where it takes a dip to at least 19.
So what should you as an investor do?
If you are already invested and looking to book profits, keep booking at every rise of say 200 nifty points or keep a trailing stop loss of 20 EMA which stands at 4777 as of yesterday.
If you want to invest money look for dips to buy. Again, one could look at dips to 50 EMA to buy which comes to 4601.
Remember, if the crash comes it will be swift and brutal. So, you will know that it is not time to enter.
The markets had come 50 EMA levels last around 18-19th August, nifty 4353 which was a buying opportunity.
Sunday, September 13, 2009
Shanghai Noon:Will History repeat itself?
The global markets are interlinked for all the talk of decoupling. The Chinese markets are supposed to be a advance indicator of what is going to happen in other emerging markets.
In Oct 07 when are markets were hitting new highs, the Chinese market corrected sharply.They were 21 pc down from their peak in 2 months.Then recovered 13 pc before the Jan 2008 meltdown.
This time, they corrected even more sharply in July down about 23 pc from its peak when our markets were hitting new peaks. They have now rallied back about 13 pc again.
Last time, it took about 3 months for the fall, rise and then the big fall. This time, it has been faster. The fall and the rise have consumed about 7 weeks.
Will history repeat itself?
Domestically, now the cues have been factored. The next positive triggers could be the half year results in October unless we have some unforseen event globally
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