Buy the Dips Continues

This week, the bulls took a bit of a breather and the markets ended down about 2.5 % to close the week at 5430. What does an investor do from these levels?

1. We had spoken of 3 event risks. 1 was Greece, second was the election results and third was the Union Budget. Greece has come and gone and its a classic case of Sell the news. The markets would consolidate till the news of the election results.

2. The election results may be a bit of non event in terms of down side.What happens if Mayawati wins? Status quo continues and the Samajwadi would need Congress help to survive. It is tough being out of power both in Centre and at the State level. Only case where there would be a problem is in case Samajwadi comes to power on its own.
Also, if the Congress does well in elections, expect reforms in the budget else expect more subsidies. This is the last budget before the government goes into election mode. If something meaningful has to come about, it has to be during this budget.

3. The current correction has the FIIs continuing to buy. This is a very good sign for the rally to continue.

4. The Facebook mega IPO comes around May-June and I expect this rally to continue till then.Many would argue we also had a bumper IPO of MCX. MCX is a very small IPO. It has a size of about 600 crores. The huge subscription also points to liquidity floating around.

5. Tata Capital NCD rates are revised to 10.5 %. We would have to send our acceptance once the forms are mailed to holders as on record date of 5th March 2012.i would recommend one continues for the remaining 2 years. This condition of Put and Call option at the end of 3 years was made clear at the time of issuance around 3 years back. Most long term NCDs have this option in place.

6. The current rise from 4532 can be part of an A-B-C up move. A ended at 5630, B is ongoing. B can be split in a, b and c. a might be over from 5630 to 5405. b can go anywhere from 5490 to 5577 followed by c down which can end anywhere between 5210-5350.

7. Post this correction, I see 1 more rally going up to 5750-6000 levels.

I would recommend to add selected stocks and keep lowering the cost of acquisition. Hold these stocks for 3-5 years by adding on dips. The Mid caps and Cherry Picks I picked with Lakshmi are doing pretty well and I would continue holding stocks and adding at every opportunity.