All Eyes on Infy Results

1 more week of gains and Nifty closed at 5362 for the week. The Result season is upon us and Infy will kick off proceedings on 13th April with 14th April being a holiday. What to expect from the Results?

1. The rupee has strengthened to 19 month high of 44.29. This will impact the IT companies earnings.

2. The Steel makers, automakers, cement makers should post good results.

3. Oil prices are at 86 dollars already. A further rise would start affecting the economy. The rupee has gained 10 pc in last 2 months or so. This should cushion the high oil prices. If the prices move to three digits then we start having a problem.

4.Bond yields are hovering around the 8 pc mark and high inflation makes another round of rate hikes inevitable in the credit policy on April 20th.

5. Gold has given a breakout in dollar terms. It is just 5 % below its peak price of 1225$ per ounce. Thanks to a strong rupee, it is 9.5% below its peak price. Gold-Oil has a ratio usually of 15 barrels to 1 ounce of Gold. Right now, the ratio is 13.5. If oil moves to 100 dollars a barrel, the fair price of Gold would be 1500$ per ounce.

6. As the days goes by the risk reward continues to become more unfavorable for owning equities. Markets do not go up forever. We had this rally for 9 weeks and rallies usually last 10-12 weeks in this post March'09 rally.

7. I had given an Elliot wave post here:
http://money-manthan.blogspot.com/2010/01/markets-is-top-in-place-or-can-we-still.html

Slighly modifying it:

If we take rally after the budget from 3918, we can see 4 clear waves:

a. Wave 1 - 3918 to 5181 (1263 points)

b. Wave 2 - 5181 to 4539 (642 points) approx 50% correction

c. Wave 3 - 4539 - 5310 (771 points) Wave 3 is 61% of wave 1.

d. Wave 4 - 5310 - 4675 (635 points) approx 82% correction

e. Wave 5 will unfold 4675 - ???
This has to be less than 770 points as 3rd wave cannot be shortest, the target comes to 5445 max.

I would simply stick to adding more Gold right now and keep a trailing stop loss.