The Correction Ends

The markets finally rebounded on Friday.It closed the week with a gain of 0.3 %. The more heartening fact was the support it got in the 5150-5200 region.

1. The Current up move which started in Dec'11 can be treated as a corrective up move to whole down move from 6339 to 4532. I believe post this up move which can end any time between May and June we will see a final fall which will have a final bottom any where from 3400-4200.

2. The current up move had a leg A from 4532 to 5630. Leg B from 5630 to 5136. Leg A was 1098 which was corrective about 45 % by leg B.

3. Leg C can have a target of 5813 which is 61 pc of leg A. In any case it should not extend beyond 5977 which is the 80 pc retracement of the entire fall.

4. Banks, infrastructure and power sector could be the sectors to lead the rally. This rally should be used to lower the cost of acquisition of shares. The same shares could be held in the long term portfolio.
An example is if 100 shares of Yes Bank were bought at Rs 332. The price when it reaches Rs 373, one could sell of 85 shares. The remaining shares will cost approx Rs 100 and a dividend of 4 rupees expected ( You get a 4 % dividend yield which will rise as the years roll by).

5. The first of the resistances should hit us around 5400-5450.

6. Larsen NCD is again quoting around Rs 995. It has a yield of 10.24% over the next 8 years and with good liquidity, is a very good option. One can sell it like a stock and get the money within 2 days.

7. The global factors are at ease. The domestic issues like Budget, UP elections are behind us. The P Notes issue has been solved (This is a trick since the days P Chidambaram was FM). Raise the issue, the markets get a beating, then come and make the right noises and we back up. I used this down move to add good quality stocks identified by me and Lakshmi. The lowering of cost price strategy has worked very well for me.

8. The Annual results are already factored in. I have noticed every quarter that very rarely the results influence the markets.