Market Direction: Technical Point of View

Its a long time since I did a study on purely technical analysis.Now, is a good time to focus on pure Technicals. Lets have a glance at e few charts below.1. Lets look at at an indicator which Shail and I have did a study of. Its the difference between 5 DMA and 20 DMA of the Nifty. Right now it is in positive territory and touching the resistance line of the previous peaks. Any close above 6025 and this trend line gets broken upwards. A clear breakout.2....

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Its Vacation Time

This was a truncated week for the markets. The Nifty moved up by 1.6 pc, the FIIs remained net sellers and there are expectations of no major moves in the holiday season. But, stock markets are known to surprise and we never know what is in store. Lets examine the fundamental and technical factors at play here.1. On the Domestic front, the the 2G scam got murkier, the CBI made a show of taking action.What could queer the pitch if A Raja actually gets arrested next week. There are 2 possibilities if this arrest is made. One is DMK drops Raja like...

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Risk Management and Investing

I had written a guest post for Subhankar.In this month’s guest post, Nishit covers the related topic of Risk Management. Properly assessing and understanding the risks involved in one’s investment plan and taking appropriate steps to mitigate those risks helps in formulating a proper asset allocation plan to suit one’s individual investment style and risk tolerance level.-------------------------------------------------------------------------------------------------------------One of the most important topics that every person who makes any investments...

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Uncertain Times in December

This was a roller coaster week for the markets and the markets lost 2.3% of the index value. There were certain takeaways for each of us, which if adhered will save us a lot of money if not make money. Lets examine the key events for the markets.1. FIIs were net sellers each day of the week. The selling intensified as the week went by and at the end of the week they had dumped almost 1 billion dollars worth of stocks.2. Even though the Indices declined only 2.3%, the broader market was butchered. Have a look at today's Economic Times and see the...

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Posts from Shail

I am happy to say that Shail will posting as and when his schedule permits him to post. Shail, is one of the technical analysts whom I greatly admire for his out of the box thinking. I again ventured into TA with Shail's help. Lets enjoy his pos...

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INR movement v/s Indian Equity

The two charts shown above illustrates the correlation between INR and S&P CNX Nifty from jan 2007 onwards, this clearly indicates that stronger rupee shows bullish sentiments of FII, although now DII also contributes significantly, in to Indian capital market.The bar chart below shows the net FII inflow in Indian capital markets in the same period which partly explains the stronger or weaker rupee in the period of study. Although the value of...

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Wikileaks: Impacts and significance

This week the world was rocked by the Wiki leaks expose of American Diplomatic cables by the now now (in) famous Wiki leaks expose. What is wiki leaks and what is its significance?To skip re-inventing the wheel, have a look at the wiki site below:http://en.wikipedia.org/wiki/Julian_AssangeNow, lets see the ramifications. In the short term, the expose of the diplomatic cables and confidential information being shared in the public domain is just a small event making headlines. The basic gist was the expose of US secret moves and name calling of...

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Introduction to Options - Part 1

Options are one of the most lucrative ways of making money in the markets. The flip side is that they can lead to huge losses if not dealt with correctly. Let us explore the world of options. To begin with there are 2 type of Options, Put option and a Call Option. Put Option gives the buyer to sell a stock or index at a particular strike. It gives the buyer the right to sell at a particular strike price but not the obligation to sell. It is similar to taking insurance on your house or car. Buying a call option gives the buyer the right to buy a...

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Worry Clouds on the Horizon: The Big Picture

Over the last few weeks, several events which have occurred which are a reason to ponder over if not outright worry. Fundamentals do not change overnight but are a work in progress and suddenly one day the symptoms become apparent to all and the trend changes. The build up to such a trend change takes a long time.Global factors:1. The US came up with the QE-2 program of pumping in 600 billion dollars. This just confirmed the worst fears that the US dollar will be toilet paper sooner or later. Aything in excess is bad and excess dollar printing...

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Expect a bounce ahead

It was a week of losses at Dalal Street but are things as bad they seem to be? Let us try and explore.1. The markets lost about 3 pc to close at 5888.DIIs bought worth 865 crores and the FIIs bought worth 32 crores. Now, this can be interpreted in 2 ways. Markets fell in spite of 2 pillars not selling indicating shallow market. Else, it was operator driven selling.2. We have trend line supports at 5803, 5830. These are very important supports as...

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Post on Asset Allocation and Financial Planning

I had done the below guest post for Subhankar. Please refer below link.http://investmentsfordummieslikeme.blogspot.com/2010/11/about-asset-allocation-guest-post.h...

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How has November been historically for the Markets?

November has been a positive month for equity markets. The high has always been in positive terms. Max of 15 pc, min 2 pc and average of 8.8 pc. This gives us probable targets of (6920, 6139 and 6547)The low points have varied from -13 pc to 0.21 pc. We can exclude -13 pc because we were in the midst of a bear market. Average has -2.8 pc giving us a potential low of 5845.The close has been positive 8 times out of 10. Average close has 5.6 % higher...

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Diwali Picks 2010

It is that time of the year.New Mahurat, new beginnings. Have a look at this year's prediction and may each one have a wonderful year ahead.Thank you Lakshmi and Lalita without whose tireless efforts, this presentation would not have been possible.The Technicals are by Lakshmi. She is one of the finest Technical Analysts I know.The link to her blog is http://vipreetinvestments.blogspot.comThe presentation can be accessed below:https://sites.google.com/site/moneymanthanfiles/diwali-picks-2...

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All Indicators in buy mode

I did not take get time to upload charts but all my indicators are firmly in buy mode. A strategy could be buy 6300 call and 6000 puts and see how it goes tomorr...

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US Elections: Mixed Signals

Contrary to the expectations, the Democrats have not been trashed as badly as expected.Holding on to the Senate is a major face saver for Obama.Mid-term elections are just a milestone onto re-election 2012. The present results may mean that QE-2 is just a damp squib. The probabilities increase of a lower QE-2.If before elections it was 80 % in favor of big bang and 20 pc in favor of less, now its 60-40.( 60 pc big bang, 40 pc small amount)Technicals indicate upmove. Keep watching for updates as we ...

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Diwali Fireworks: Explosive Week Ahead

Its Diwali Time and it is going to be a explosive week ahead, most probably the most explosive week of the year. There are several reasons and I am going to list them one by one. This definitely merits both a fundamental and technical analysis. The Technical Analysis will follow in a day or two.Fundamentals:1. RBI Meet on rate hikes on Tuesday, November 2. The Bank is expected to hike rates by 25 basis points. Liquidity is presently tight because of Coal India IPO, but that situation will ease by Monday when the allotment occurs. 2. The Fed Meet...

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TCS Results Rock

Very rarely do quarterly results of companies get me excited. I consider them as mere milestones on a journey. Milestones to which undue importance need not be attached. Poor or great results over a quarter or two are not earth shattering news except for the pink papers and news channels. TCS results are one which made me sit up and take notice. Why?Here is why? They added almost 20000 employees in 1 quarter. They had double digit growth in all Verticals. Their profit margins were almost 30 pc and gap between Infosys and TCS is just 2.2 pc in terms...

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Happy Dussehra

Wish all of you Happy Dussehra.Here are some of the legends behind Dussehra.In the months of Ashwin and kartik, Hindus observe a 10 day ceremony of fast, rituals, celebrations, fiests to honor the mother Goddess and triumph of Lord Rama over Demon Ravana. Dussehra also symbolizes the triumph of warrior Goddess Durga over the buffalo demon, Mahishasura. Thus, it is a celebration of victory of good over evil.This celebration starts from Navratri and ends with the tenth day festival of “Dussehra”. Navratri and Dussehra is celebrated throughout the...

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Gold Rush

Gold has suddenly become a hot investment option. I have always felt one must have exposure to Gold in our portfolio and here are some of the reasons why I feel so.http://investmentsfordummieslikeme.blogspot.com/2010/10/go-for-gold-guest-post.h...

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Financial Goals and Asset Allocation

This week, lets step aside and take a look at the purpose of investments and financial planning. I always like to say we work for our money but does the money work for us?People get up every morning, go to work and come back in the evening. Now, what is the purpose of doing this day in and day out? It could be job satisfaction, work as a hobby but the primary purpose of going to work is to earn money.The idea of setting financial goals is like setting milestones to take us through the journey called life. People work so that they can have a comfortable...

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Why FIIs invest in India

Here I am taking an illustration given by my friend Aarti. The FIIs stand to gain much more than us Indians. Here is why?The rupee rate is 48 rupees to 1 USD. Assume, we buy Nifty BEES (Benchmark ETF) at 480. This means Nifty is at 4800. We get to buy 100 units of Nifty ETF with 1000 dollars.ow a couple of months have passed by and Nifty reached 5350. Our ETF rate has gone to 530. The Indians earn 10.41 pc rate of return. Now our friend Mr Bernanke continues with his low interest rate regime, interest rate of almost 0 pc, he prints some more dollars,...

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IDFC Infrastructure Bond Issue

Every week, we look at equity related offerings. This week, lets step aside and look at some debt offering. IDFC is coming with an Infrastructure Bond issue which closes on October 18th 2010.The government has issued a notification that an additional amount of Rs 20000 can be invested in, other than your limit of 1 lakh rupees under section 80. This means this Rs 20000 will be exempt from your taxable income this year. Depending on which tax slab...

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Deviations from the Moving Averages

Markets tend to go through phases when they keep on going higher at a sustained rate or lower at a steady phase. They tend to deviate from their average prices of various periods like 20, 50, 100 and 200. Eventually they always come back to the average prices.The genesis of this study came from SS who writes a very informative blog at http://timamo.blogspot.com/ which I love for its out of the box thinking. I have taken his study of 50 periods further...

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Put Call Ratio and the Nifty

The definition of Put-Call Ratio (PCR) is as follows:The ratio of the volume of put options traded to the volume of call options traded, which is used as an indicator of investor sentiment (bullish or bearish).1 school of thought says that a high PCR means more number of Puts have been written and markets should go ahead. Another school of thought says the converse.Lets go by the data in hand for past 1 year.The market has bottomed when PCR was around...

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Hotel Leela

I had written a write-up on Hotel Leela for Subhankar's blog.In this month’s guest post, Nishit speculates that following the stake purchase in East India Hotels by Reliance, a possible consolidation in the hotels sector may follow with Hotel Leela as the likely target. Leave a comment to let us know if you have a different view.Continue Reading at:http://investmentsfordummieslikeme.blogspot.com/2010/09/hotel-leela-next-takeover-target-guest.h...

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India VIX and Market Tops

I decided to study the India VIX and its behaviour when the markets hits a top. Thanks to Natasha for pointing me to this study. First of all what is the India VIX? Volatility Index is a measure of market’s expectation of volatility over the near term. Volatility is often described as the “rate and magnitude of changes in prices” and in finance often referred to as risk. Volatility Index is a measure, of the amount by which an underlying Index is...

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Black September: Or is it?

Most of us would have heard of Black September. No I am not talking about the infamous Munich massacre but the theory that the markets would tank in September. I did some number crunching from the years 2001-2009 to check out the facts and fiction.1. In all the years from 2001 onwards, the low of September has been at least 0.5 % less than August close. This is irrespective of it being a bull or bear run. August close for this year is 5402. So, going...

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Importance of 5349

1. This is the for the past 8 weeks. A break of this take us to 5225, the previous low.2. Monthly pivot at 5357 and weekly support at 5357 are key levels.3. Next support at around 5300.4. 50 ema at 5387, we can have a bounce uptil this point.Strategy: Book part shorts and watch a clean break of 5349. resistances at 5387, 5451. Go long only above 5400 if you are aggressi...

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Nifty Tops and Difference from the Moving Averages

Lets see the last few times when the nifty hit major tops and its behavior after that. Thanks to Natasha for suggesting this line of analysis.1. Lets take the 20, 50, 100 and 200 MA and the distances by which they were above the Nifty in percentage terms when the markets hit the Tops. As each next top is hit, the out performance is steadily coming down. This implies that the rises are getting slower.2. Next I took the falls after each rise. They...

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FII Flows: How dependent are we on them?

I did a study yesterday on the 4 market rallies since July'09. I came to some startling conclusions. They do not paint a very happy picture. Our markets are getting shallower even if all the drumbeats say new all time highs.Have a look at the images.1. The rallies are getting slower. The first 3 rallies had about 18 points per day gain on an average. Last rally has barely sputtered to 11 points a day.The rise has been very slow in the last rally....

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Cairn India

I had written a guest post for Subhankar's blog today.Oil is also known as Black Gold. The lust for oil has led to many wars. Empires have been built on oil and lost due to oil. Oil prices in the next decade may very easily rule above 100 dollars a barrel. Do not believe it?Continue Reading at:http://investmentsfordummieslikeme.blogspot.com/2010/08/cairn-india-oil-story-worth-betting-on.h...

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Diwali Picks Performance

Last Diwali, Lakshmi and I had prepared a Diwali Picks presentation. The below chart gives the performance.http://money-manthan.blogspot.com/2009/10/diwali-picks.htmlThe peak performance was 26 pc and average was 20 pc as compared to 6 and 6.8 pc of the Nifty.I would recommend booking 50% of the portfolio and remaining in cash. Some of the things we noticed:1. Maruti Sales have recorded all time highs since Diwali, but share prices have gone no where.2....

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The Deadlock Continues

The Market continues to test everyone's patience. The Dow was down almost 3.5 % during the week. Our markets gained only 0.2 pc or 13 points on the Nifty. The Sensex rose by 24 points but 84 points were contributed by SBI.1. FIIs have pumped in over 4000 crores in August and 16000 crores this year.The nifty has rallied only 2 pc in spite of almost a billion dollars being pumped.2. The Gann fans show that the critical resistances around 5500 have...

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Watch for Decisive Break of 20 ema

A quick mid week update. Just have a look at attached chart. Whenever 20 ems is broken cleanly we have a big correction of additional 400-500 points. 20 ema is at around 5415. If gap down tomorrow chances are 4900-5000 is immediate target in next 4-6 wee...

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Big Move coming up

The past few weeks has seen a range-bound action. The Market has been unable to break out or break down. Such Ranged moves occur typically before a huge breakout or a breakdown. Lets look at a few technical and fundamental factors.1. The Bollinger Bands have contracted and the range is 5360-5478. Breach of either these 2 levels will lead to a big move either ways.2. There is huge Open Interest at Puts of Strike prices 5400 and below. In the past...

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Ayn Rand on Gold

I was reading the The Atlas Shrugged by Ayn Rand and came across this piece on Gold which was written by her in 1957."Whenever destroyers appear among men, they start by destroying money, for money is man's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of a arbitrary settler of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exists,...

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Interest Rate Hikes: More to Follow

It was an Action packed week, with RBI Policy, RIL Results and Options Expiry. The week also offers pointers to the future direction of the markets.1. RBI hiked Repo Rates by 25 basis points and Reverse Repo by 50 basis points. Repo is the rate at which RBI lends to the banks and Reverse Repo is the rate at which it borrows from the commercial banks. The CRR or the Cash Reserve Ratio was left untouched.2. The RBI sent out a message that further rate...

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Option Pain

This is Option Expiry Week and lets look at what Options Expiry is all about?The definition for Option Pain taken from Optionpain.com is: "In the option market, wealth transfer between option buyers and sellers is a zero-sum game. On option expiration days, the underlying stock price often moves toward a point that brings maximum loss to option buyers. This specific price, calculated based on all outstanding options in the market, is called Option...

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Markets Next Week

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