Year End NAV dressing will keep the market afloat

The Hope of a Rate Cut rally continues and the markets gained a further 1.5 % in the truncated week. The year NAV dressing time is here and the bonuses of the Fund Managers are dependent on the NAV values so expect the markets to remain afloat at least in the first half of the week.

1. The key ingredient of a rally is the FII inflow and till date in March the inflow has been 16500 crores. This has been the highest since March 2014 when it was 25000 crores. As long as the money is pouring the markets will rise.


2. The RBI policy on the 5th of April is a key trigger. A 25 basis rate cut has been factored in. It could also happen that it is a sell on news kind of event. The markets have run up almost a 1000 points and some kind of correction is due.

3. The Result season is in April and as we have noticed in the past the Results season usually the markets are flat to negative.

4. Technically speaking we have resistances coming in from the 200 EMA at 7778 and at 200 DMA at 7900. The layer between 200 EMA and 200 DMA becomes a critical zone. This zone is tested before a breakout or a breakdown.

5. The Global cues are quiet at the moment. So everything depends on the RBI Action in the first week of April.

This is a good time to book profits for stocks bought at a lower level and wait for a dip to buy again.

Nifty in Resistance Zone

The markets continued their upward march after the Budget to close up 1.3 pc. The FIIs have continued to support the markets in the month of March. I feel the post budget rally may be coming to an end and we should soon see a correction of about at least 400 points which should be a buying opportunity.

1. The FIIs have bought big in March almost 12000 crores worth of stocks. This is the highest in the last 2 years.

2. The Markets have retraced the last falling leg from 7600 to 6825 in faster time. This means it has made up the lossses from top to bottom in faster time. This is a bullish sign.

3. The markets may have made its bottom at 6825. What does this now mean for the markets now? It means now that every dip is a buying opportunity. The markets should generally correct about 50 % of the rise before continuing its up move. This is a thumb rule and need not be followed. If we go by this logic then, this means we can touch 7219 once again. 7240 is also a very crucial support for the markets.

4. For a change. I looked at the Technical Indicators like RSI and Stochastic. As the image shows they are at a point where the market usually makes some kind of a top.

5. There is no major news to take the markets up now. The next major trigger is the RBI policy on April 5th.

6. The coming week is a truncated week with the markets being closed on Thursday and Friday. This can lead  to profit booking in the markets.

7. Globally, also for the month of March all triggers seem to be over. There is a saying stocks are always cheaper in April. So, if we continue this rise for 2-3 sessions more and then there is a correction, then the saying will be correct this year also.

FII Buying Continues

The FIIs bought for all the trading sessions in March so far and the index sustained its post budget rise. Let us see what can influence the markets going forward.

1. Every correction in the markets has lasted 12-14 months so far. By correction, I mean the time taken to reach a low point from the top. In this case 9119 was the top. In all probability, 6825 might have been the bottom. It is always said that the markets visits a bottom once. In this case, 6869 and 6825 are very close by.

2. The first up move from 6825 has lasted about 800 + points and may be nearing completion. We may have a 300 400 points correction which would be a buying opportunity. The support zones comes to around 7240.

3. The Advance Tax numbers will be out next week and will be a good indicator on how the companies have fared.

4. The next major event in the Markets is the Annual Results but that is still some distance far off in April. The FOMC meet next week could be 1 trigger for the markets.

5. Technically, we are in the Resistance Zone of 7500-7600, break of which can lead us to 7900-8000 region.

6. This could well be the last opportunity to capitalize on the lower stock prices.

7. The expectations of RBI rate cut in the first week of April is what is keeping the markets up.

As of now, it looks like the bottom is made for the time being and every dip is a buying opportunity.

FIIs buy in Huge Quantities

Finally, after selling for the past few months, the FIIs have bought big in March and the markets have rebounded. Let us see if this rally has the legs to go higher.

1. The Budget was nothing great, the key take away from the budget was sticking to the fiscal deficit target. Many had expected that to infuse growth, the Government would do more spending and as a result of which relax the fiscal deficit target.

2. The FIIs have given a thumbs up to the budget and pumped in almost 6000 crores into the markets in the 4 trading sessions of March. The results were evident and the markets have risen correspondingly almost 10 pc from the intra day bottom of the Budget day.

3. The burning question is what next for the markets. The markets have risen up to the critical resistance levels of 7500-7600. From these levels, the markets can retrace this rise by say 300-400 points to 7100-7200 before continuing the up move.

4. The markets once they clear 7500-7600 will face the next set of resistances at 7900-8000 levels.

5. Only above 7751 we can say that the down move is complete and we are in a fresh up move.

6. So what do we do next? Buy when the markets cools down a bit to 7200-7300. From here the market can make 1 more low or continue higher up.

7. If the bottom is in place, then in the next 18 months, the market should make new highs in the 10500 region.

Most bear markets do not last more than 12 to 14 months. We are almost 1 year since we made a previous top of 9119 and the journey back up should recommence. By bear markets not lasting more than 14 months, I mean the time taken to make a bottom after hitting a top is generally not more than 14 months.

DownTrend Continues

Unless the Union Budget pulls off something which is groundbreaking, I can see the down trend continuing. The DIIs have started selling now and there seems to be no respite to the markets.

1. The latest casualty of the global downtrend is the valuations of the Startups and Flipkarts of the world taking a hit. Morgan Stanley has written down the valuation of Flipkart by 27 pc.

2. The DIIs too have started to sell big. This is a matter of concern. For the month of Feb, with just 1 trading day left  FII have sold 5700 crores and DII have sold 6800 crores.

3. Technically, Feb is supposed to be a flat month but this has been proved wrong this time. Unless there is a big rally on Monday, the market is down 7.1 pc for the month and 11.5 % for the year so far.

4. If the previous lows are broken then the next supports come in around 6450-6550.

5. 1 thing is clear, the time frame for getting return on Investment has got enlarged. 1 would have to wait at least 18 months for stocks bought in the current downtrend.

6. There seems to be no sign of the passage of the GST bill in the Parliament. 1 major trigger for the markets to rally is missing.

7. Unless the FII flow gets back to normal, this down turn will continue. Every rally will be sold off into.

8. I can see this Government losing focus of the issues at end getting side tracked. Unless Modi concentrates on reforms, I see it getting increasingly difficult he being re-elected again.

All in all it is a tough time all around. The Fixed Deposits are not earning more than 7.5 % rate of interest, Real Estate is sluggish and the stock markets are down.

No Pre-Budget Rally this year

Contrary to expectations, we did not have a pre budget rally this year. There are various reasons for it and the way the global cues are factored in, the market may not have a pre budget rally after all.

1. The FIIs continue to pull out money. They have pulled out about 6500 crores so far in Feb and are sellers almost everyday.

2. The Sovereign Wealth funds which had invested their Oil Earnings in India have now begun to pull their money out. That is 1 more reason why we see high FII sell figures.

3. The passage of the GST bill becomes very crucial for the Government this session. With the domestic politics getting ugly to say the least.

4. Technically, the market is stuck in the range between 6850 to 7400. The previous support of 7242 will become a very key factor for further up moves. Technically, we are in a sideways zone.

5. If we look at the big picture, I do not see this market going anywhere for the next few months. It will give very good buying opportunities.7500 and then 7600 remain very key resistances for the market.

6. The Investment Alternatives are very less in these conditions. Fixed Income Instruments are barely getting anyone more than 8 pc. Equities still remain the best asset class to invest. The only change is that the instant gain period is over.

7. The Rail Budget gets presented next week and that will present clues about the Union Budget. It is very clear unless there is something dramatic in the budget or the passage of the GST bill the markets will continue to totter for some more time.

The Silver lining is all major corrections have not lasted more than 12-14 months and we almost 1 year since we hit the top in March 2015 after the Union Budget.

Markets defy Average Fall for Feb

The markets tanked big time and the way individual stocks sold off, it looks like capitulation is happening. Let us see what could be the factors to influence the markets.

1. The Result season has come to an end. The PSU Banks finally acknowledged huge bad loans and that lead to the markets tanking further.

2. The FIIs are continuing to sell big time and till the time they stop their basket selling, the markets will not rise.

3. There is a fear factor in the Global Markets and hence Gold is rising. Only, once this fear factor wave passes over, the markets will start rising.

4. Technically, we are in the support zone of 6400-6800. If 6400 breaks then one can say entire bull market phase is over and we are in a for a prolonged recession.

5. The Passage of the GST bill and the Union Budget are only things which can make the markets rise from these levels.

6. 7400-7600 the previous highs now becomes a strong resistance zone and an area to which the markets could attempt before the budget.

7. The indicators have reached an oversold area and a Technical bounce is due. This bounce could be 400-500 points before we resume the downtrend.

From the way, the markets have fallen it is very clear, that we are in a for a prolonged bear market and it will take at least 1 year to 18 months before the market can make new highs. It is a time to be patient and stay invested in good quality stocks.

Those brave enough to buy now may well see the stocks they had bought doubling in next 2 or 3 years.

FIIs continue to Sell

The markets lost 1 pc for the week even though a late week recovery was made on the back of DII buying. The FIIs continued to sell and till they resume their buying no meaningful recovery can be seen.

1. The dates of the Union Budget were announced as 29th Feb and we may see some kind of pre budget rally brewing if the FIIs stop selling.

2. The IPO market is buzzing with the Team Lease IPO and the Quick Heal IPO opening on Monday. These are well run companies.

3. The GST bill is expected to pass in the coming session of Parliament. If the bill goes through then there would be a big rally else the correction continues.

4. There are no immediate triggers for the markets to rally or fall and hence the market is stuck in a range.

5. Technically, the markets are not giving any clear breakout or breakdown sign. Only above 7693, 7825 we can say we are headed to 8200. 7400 is a strong support zone. A break of 7400 can lead to fresh lows.

6. The crude oil prices have stabilized and so has the rupee.

7. February is not known for any violent moves and we may see range bound trading with a slightly positive bias unless there is major bad news globally.

It is time to be patient and accumulate good stocks.

How has February fared after a weak January?

This time I am taking a break from the usual weekly posts and trying to analyze statistically how the month of Feb has fared? Feb usually is the month of hope with the Union Budget coming up. Let us take a look.

1. In the last 15 years, Februray has been negative only 6 times which means generally February is a positive month.

2. When the month of January has been negative, February has been positive only once has been Jan, Feb both negative.

3. The maximum gain in the month of Feb has 6.2 pc and loss 5.7 pc. Taking an average swing of 5 pc we get a range from 7941 to 7184. This means book profits closer to 7950-8000 and start buying closer to 7200-7300.

4. The FIIs bought on the last day but still they ended up selling about 14356 crores for the month.

5. The 100 week moving average also comes to 7969. This means 7950-8000 becomes a very crucial resistance for the markets.

6. The entire down move could have ended at 7241 or 1 last leg is pending. This could be possible as corrections usually last for 13 months and should end sometime in April.

In any case, 7200 to 7600 is a very good buying range for long term and 8000-8200 is a range where profit can be booked to see if the markets rise further.

FIIs continue to Sell

The markets recovered almost 200 points from the bottom to close almost flat for the week and in the process also formed a Doji. Is a bottom in place? Let us look ahead and see what the markets have in store for us.

1. Technically, the markets have met all the criteria for a bottom to be in place. 7118 on the day the election results were declared that remains a key support area. This also means the euphoria over the Modi election is over now.

2. The fall may have ended or we may now retrace the fall from 8336 to 7241. If this is the case then the targets are 7659, 7789 and 7917. Only above 8117, we can contemplate that the correction is over. Time-wise the correction can go on till end of March. In which case a rise now and 1 more fall.

3. We have the famous 8 year cycle, in which every 8 years the market corrects big time. In 2008, we fell from 6353 to 2252.  If we take 5118 in August as the start of this rally, then the targets were 7591, 7118 and 6646. The 6350-6400 is a long term support area and breach of this would put an end to the Bull market.

4. The indices tell only part of the story. Reliance is almost at 52 week high and Nifty at 52 week low. Which means the other Nifty components, mainly the Banks have lost big time. If India has to do well, the Banks have to do well and the Private sector Banks represent a lot of value.

5. The FIIs continued to be net sellers and till this trend continues, there cannot be a big rally. They have sold 13500 crores in Jan with the DIIs buying 11500 crores. There are 4 trading days to go in Jan and if this trend continues it would be the largest monthly outflow since August and September.

6. Fundamentally, for India low crude oil prices is a very good thing even though our exports may take a hit. Repatriation of money from the Gulf will also stop. There are layoffs in the middle east. Petroleum products form 18 pc of our exports and lower crude prices means lower exports in terms of value.

7. Fundamentally also we are at cross roads, Modi has done a lot in the 20 months in office, but a lot more needs to be done like the GST bill.

I would say this is amongst the best time to add quality stocks provided one has the faith in the India Story as also the willingness not to get scared if we see much lower levels from here.