Stocks at Attractive Levels

The markets continued their downward momentum picking up from the first week to lose another 2.2 pc. There is an environment of doom and gloom everywhere. Let us look and see if the things are really as bad as they seem.

1. The Results season has kicked off and Infosys has shown that innovation still leads to out performance. TCS seems jaded and Infosys seems on an upswing. It is a cyclical story and the baton keeps swinging between the 2 giants.

2. FIIs have sold and sold big in 2 weeks of Jan 2016. Almost 7500 crores worth of shares. This is a huge figure and the DIIs have bought about 5300 crores. There are various bond issues sucking out money from the markets. The FIIs are selling not becuase they have given up on India but becuase they are under pressure to bring money home.

3. China slowing down has lead to commodity prices coming down and India is best poised to take advantage of this. The money one puts in now will definitely reap rewards 12 to 18 months down the line. If we take the worst case scenario of Jan 2008, then at that time in time of panic the stocks bounced back in March to give 20-30 pc returns before again falling down.

4. Every 2-3 years such scenarios come in the Market and that is the time when the stocks are to be tanked up. If everything is falling, then one cannot question why a particular stock is falling down. The Budget session and the passage f the GST Bill becomes very crucial at this point of time.

5. The Sovereign Gold Bond issue is another option for those who want the safety of Gold and earn 2.75 % interest per annum.

6. Technically, we are approaching the support zone of 7200-7400 and from where the markets can bounce up 400-500 points. Whether this is the last leg of the fall is not clear.

If A was 9119 - 7940 = 1179 points
B was 7940 - 8654 = 714 points

C should be  7475 already achieved or 7154. Technical Analysis is an art not an exact science so we may well be in the last leg of the fall.

The best approach is buy fundamentally strong stocks, be prepared for lower levels and be open to averaging. Folks should be willing to stay in the markets not get worried by everyday falls. The Best money is made in the scenario prevailing today.

China spooks the Markets

The markets lost 4.5 pc in the first week of January as fears over China slowing down led to world markets having a bad first week of January 2016. For long term investors, this is the best time to buy, if they believe in India.

1. The world markets were down and if the world markets are down, India follows suit. This is because FIIs have to pull out funds and they do basket selling. It is not as if there is a problem with India. They have pulled out 3300 crores in  the first week of Jan itself.

2. Crude oil prices are at 11 year lows which means the fiscal deficit will definitely be under control. The 7th Pay commission handouts will lead to rise in  the consumption story.

3. Gold has started inching up because of the fear factor but because of the long commodity cycles, gold will remain in a cyclical bear market for few years to come. Thanks to the rupee depreciating, Gold will continue to do well as an asset class.

4. The Results season will kick off in right earnest from the next week. Results month is usually a sideways to slightly negative month.

5. Large caps have seen a fall whereas mid caps are still flying high. The situation has to correct, and it is prudent to selectively book profits in mid caps which have given good returns so far.

6. 7500 is the next support for the market and 7200 after that. We hit a top of 9119 in the month of March and have completed 9 months of correction. 13 months of correction can follow so we may take out previous highs any time only after April 2016.

It is a time to buy and buy selectively. Buy quality names which you should be willing to buy even if the market goes down further.

Round Table for 2016

I am taking a break from the usual weekly format which I usually post in. My article had got selected for the Investing.com Round Table which was published about 2-3 days back.

I am giving the link here.

http://in.investing.com/analysis/2016-outlook-4065





My part is as below:


Nishit Vadhavkar 2016 Will Be The Year Of India
With low commodity prices globally, India will get the raw materials cheap for the Make In India Program. India, being a crude oil importer with almost 80 pc of crude imported, will have a lower fiscal deficit. Lower steel prices will further help in infrastructure development at optimal costs. Domestically, good governance with transparent auctions of Coal, Spectrum the roadblocks to doing business in India have been removed. India will have the highest GDP growth rate amongst key economies of the world, coupled with a falling interest rate regime, low inflation, aspirational middle class, we have a perfect recipe for markets to take off. Sectors I am most bullish on are Capital Goods, Private Banks, Defence and Power Sectors. Low commodity prices, good governance coupled with Managements with high Integrity in the sectors mentioned above will lead to winners in one's portfolio.

2016 is the year of hope, year where big money is to be made. A rare combination of events has lead India to be in the sweet spot it is in.

Copy paste the link if doesnt open to the Round Table views.

I would also take this opportunity to thank my mentors Taran Marwah and Subhankar Ghose for their guidance.

It is the time for new beginnings, to leave the old behind and have fun.

Holiday Season is here

The truncated week saw the markets rising up. They rose 1.3 pc. The FIIs are on vacation and I expect the expiry week to sustain the gains. Let us look at the way ahead.

1. The markets saw a dip in the volumes towards the end of the week. The FII selling has stopped. This means expiry week will have a positive up trend to it.

2. The Modi PR overdrive means the market has 1 more cheer to go up in the near term. The markets will show some real movement only if it crosses 8300. A rally up to 8100 is normal and is expected.

3. The US Rate hike is behind us and the news heavy items we have put behind us. The next triggers for the markets to move up will come in the corporate earnings around 10th of Jan 2016.

4. The IPO market is kicking which money is floating around. I expect 1 more round of correction or it may have already ended. Value stocks are still cheap to buy.

5. 2016 will be the year of India. There will definitely 1 more rally which will take us to new highs. I will post my 2016 outlook sometime early next week. Please keep watching this space. Happy Holidays and a time to take it easy for the rest of the Year!!!

Technically, we will bounce from here, expiry will take the markets up but that need not mean the woes are behind us.

Keep adding strong stocks at correct valuations.

Holiday Season beckons

The markets rose 2.2 pc for the week.The percentage rise rarely reflects the true picture. Let us see what can affect the markets in the coming week. We are now approaching the vacation period and the time for a significant move is coming.

1. The IPOs continue to suck out huge money from the market. NHAI IPO of Tax free binds will take out the HNI money. It is a very good tax saving tool for the HNIs and those in the higher tax slabs.

2. The money released from Dr Lal and Alkem IPOs is mostly likely  to find its way into Narayana Hrudayalaya IPO. The Retail money will not be available as the Indian love for making a quick buck in the IPO market continues.

3. The FIIs have sold 3800 crores wroth of stocks in Dec so far and the DIIs have bought about 4700 crores worth of stock.The markets have still corrected 2.2 pc for the month which means there is selling in the markets by the third pillar Retail and the HNIs.

4. The FIIs go on vacation very soon and the absence of FIIs means at least selling should not be there. There could be a short term rally but I see resistances at 8100 and then 8300.

5. The overall trend remains down and I see 7200 coming for sure. The overall India growth story remains strong and with Crude Oil and Commodities at multi year lows, the industries which use these raw materials will perform strongly over the long term.

6. We are now 9 days away from the expiry and with most people bearish, the operators can induce a false hope rally manipulating the Nifty. It does not take too much to take the Nifty up by 300-400 points.

7. The Cash stocks are moving up and the Value stocks are hitting fresh lows.

All in all, I feel we are on the cusp of something big and now is the time  to be in Equity, with buy on every dip. Value stocks which will appreciate over the next 3-5 years.

Time to Buy is Here

The markets fell down 2.2 pc for the week to close near the low point of the week and the time to buy stocks is here now. There are several reasons for this and I can see very good reasons to buy stocks right now.

1. The FIIs continue selling and that pillar is not there yet to support the markets. The markets functions on 3 pillars FIIs, DIIs and the Retail which includes the HNIs.The DIIs have purchased stocks worth Rs 1270 crores vis a vis the FIIs selling 3500 crores. The third pillar retail will now get busy saving in tax saving instruments.

2. The IRFC IPO sucked out 4000 crores from the market, NHAI issue is worth 10000 crores hitting the marktes, the equity IPOs of Alkem, PathLabs and many more coming up. All this money is pulled out from the equity markets and locked into these instruments.

3. Even though the Nifty is at 7600, the Value stocks are at much lower levels. The next few weeks will provide us with the best buying opportunity in times to come.

4. This week has the Fed Rate Meeting n 16th December 2015, then the passage of the GST bill to passage. All these are just reasons for the markets to rise or fall. The real reason is liquidity being sucked out of the markets.

5. The FIIs will go on vacation by this weekend. This will ease the selling pressure and may start a Santa Claus rally as the selling pressure will not be there. Also, the year end bonuses are calculated.

6. The Cash stocks have given loads of profit and the smart money locked in the profits in the bonds. No one has the patience these days to wait out for 5 or 10 years. These are the windows of Opportunity which one needs to exploit.

Suddenly, cash will find many suitors and equity on the face of it will no longer be appealing but this indeed is the best of times to buy stocks only if you are prepared to see your stocks go down 20-25 pc from here also.

We are at 7600 but for value stocks we have already reached 7200.

GST to dicate the trend next week

The markets lost about 2 pc to fall down to 7781. The markets are poised at very critical levels with 7700 being the key support levels. Let us see where the markets can go from here.

1. The GST bill has there has to be some headway in the coming week. With the FED meeting poised for 16th December, a movement forward on the GST has the potential to take the markets forward.

2. The key resistance for the markets comes to about 8100. It needs to clear 8100 to make some headway. The next Resistance would be 8400.

3. The markets as per Elliot should touch 7200 or 6800. TA is a an art and not a perfect science. The numbers may not be exactly hit but the trend is usually correct.

4. FIIs continue to sell and that is what points to the markets being lower.

5. In 2009 and 2011, the markets had hit a bottom in December and rallied. There is always the November Feb rally which takes place.

6. Gold prices have hit a nice bottom. I would start accumulating for the long term.

7. The cash stocks have rallied and the Value based stocks are giving a good entry point. I am churning the portfolio.

All in all, it is a very calm Sunday before action packed 2 weekends of GST, Fed Rate hike and lot of news flow based events. Usually, it is a sell on news kind of market.

RBI Policy to dictate direction next week

The markets gained 1.1 pc last week to end higher. We are headed to a data heavy week with the RBI Meeting on December 1. In the immediate next week, I expect the markets to move higher from current levels.

1. The RBI Governor is unlikely to cut rates especially with US Fed meeting on Dec 16th. Rajanl ikes to surprise and may still cut rates.

2. The FIIs continued to be net sellers for the month of November. Hug FII outflows mean that the markets have declined that month.

3. The Gold scheme of the Government has been a success. Instead of ETFs the Investors will now buy bonds from the Government. India has Sovereign Gold Reserves which can be now be held against the Bonds.

4. The FIIs will go on vacation soon, and the Coal India FPO I believe will hit the markets at any moment. Fundamentals suggest a buy.

5. So we are now entering a quiet phase within the markets but at the same time some turbulence due to Central Bank meetings.

Long term view still remains the same, buy on dips.

The Dust Settles

The last few week have been tumultuous and now the dust is beginning to settle. Let us remove chaff from the wheat and filter the noises out. The markets gained 1.2 pc in the last 1 week. The target of 7200 is now 500 points away from the current low.

1. The Power Reform announcements if and when implemented will lead to the Discoms recovering the lost ground. This was the most groundbreaking announcement of the past few weeks.

2. Coal India FPO which will hit any moment, full subscription is advised for the Retail Investors. Coal India gives god dividends and at least Rs 20 can be expected this time around. The dividend yield itself will be around 6 pc.

3. Coal India has got the approval for exploring Coal Methane Blocks, this will need to significant new cash flows for Coal India.

4. The FDI announcements in various sectors will lead to more foreign money flowing and Defence is the key sector I see benefiting. Defence Sector from the Private parties is under developed in India and I see the Private Sector in Defence in India as a sunrise sector.

5. The time to talk is over and the Government will get down to business now. The Phase 2 of Modi first 5 year term has been kick started.

6. Power, Defence, Pharma and Banking are the key sectors I will watch at with special focus on Infrastructure lending.

Things have started moving on the ground. The next few weeks should provide us with more buying opportunities.

Mahurat Pick - Tata Motors

My pick for this Mahurat is Tata Motors. I do not hold this stock in my portfolio for the last 10 years and will add the first lot today. I will not look at it for 5 years and will evaluate it in 2020.

The Reasons for buying Tata Motors stock is:

1. Legacy of Tata Motors is more than 70 years old and the legacy of the Tata Group goes back even further. The Tata Group with their motto of Leadership with Trust is here to stay for the next 100 years at least.

2. The Jaguar Land Rover acquisition has been a master stroke. With this they have access to the latest technology and have moved the Research centre to UK.

3. HorizonNext program is launching cars at the right price point starting with the Bolt, Zest and Kite on its way. In the next 10 years I see Tata Motors having a car in every segment from the Nano to the Jaguar. Once they have loyal customers in place, the same customer will upgrade to the next car in the category.

4. They have right people at the top with Mayank Pareek who set up the Sales Process with the Maruti Team and Karl Slymm before him. The Best Practices from Maruti are being implemented in the Tata Motors Group.

5. India as an automotive market is growing. Society is becoming aspirational and disposable incomes are rising. Savings Rate may be going down but the spends are going up. There is a market for the cars.

6. Look at the trend of sales for Zest in last few months. Chugging along with now nearing 2500 units per month. The stability in numbers is heartening.

7. Capacity is available at Sanand for fresh cars. The Nano is an example of the innovation and frugal engineering.

8. People do not leave the Tata Group for life. They have the Tata Administrative Services or TAS which is second only to the IAS cadre in terms of trained personnel.

9. Vision is clear with the group logo "Leadership with Trust" and the HorizonNext program. This clarity of vision at the group level of Tatas and and at Tata Motors company level is heartening.

10. Price is attractive right now. No one is looking at Tata Motors. In 2001 when it was down in the dumps, I made 10 times the profit and got out.

People, Processes and Technology - the combination of these three lead  to success. Right leadership with streamlined processes in place and having the state of the art Technology in place.

On a personal note, I have owned 5 Tata Cars in the last 14 years. The Indica, Indigo CS, Manza, Nano and now awaiting my Zest.

2 CEOs have intervened to resolve my issues at 2 different points of time. If there is such strong Focus on Customer Experience and Customer Loyalty, the company is a blind buy.