Has the Santa Rally started?

The markets digested 2 events of the Central Banks of the US and the RBI coming out with policy pronouncements. Let us see what they mean for the markets.

1. The US Fed has started slow tapering of the bond purchases from January. The markets did ot show any major negative reactions because it was reduced only by 10 billion USD and the Fed softened the blow by saying that the low interest rates regime is here to stay.

2. The tightening of the monetary policy means that the party for Gold is over unless there is some major event like a geopolitical event. Gold peaked at 1920 USD some time in September 2011 and has been on a downward spiral ever since. Now it is trading at 1200 USD. The price of Gold in rupee terms increased because the rupee has weakened by about 20 pc since September 2011. The exposure  to Gold can be reduced and no further Gold should be added to the portfolio.

3. The RBI has held rates becuase the inflation has been primarily been due to the food inflation. This is expected to come down in December and Januray and hence the rate hike has been deferred till the ext policy meeting in mid-January.

4. The markets rose on the RBI decision to hold the rates, took a momentary dip on the US Fed decision but then smartly rose on Friday.

5. The 6350-6360 remains a key resistance level for the markets to overcome. Once, this is broken and the 6415 previous highs are surpassed, once can expect the markets to rise. The targets remain of 6500-7000. The markets are entering the holiday season and one can expect lacklustre activity going forward.

6. The coming week is a truncated week on Wednesday being a Christmas holiday and expiry being on Thursday which can lead to volatility.

It is time to enjoy the Holiday season and maybe look for trading bets.

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Sell on News comes true

There is an old adage in the markets, Buy on Rumours and Sell on News. The markets displayed this by hitting an immediate high on the news of BJP victory and then promptly retreating back to close the week 1.5 pc down. Let us see what can happen next?

1. The FIIs have continued to buy every single trading day in December. The DIIs selling is lessening. As long as this FII buying continues, the markets will not tank.

2. This week, all eyes will be on the Central Banks as we have the FOMC meeting and the RBI meeting. I expect some kind of Repo Rates hike in the RBI meeting. The FOMC is unlikely to make any statement which is dramatic as this would be the last meeting Ben Bernanke would be chairing. Typically, he would leave the tough announcements for the next chair Janet Yellen to make in January.

3. The markets gained 9.8 pc in October and have lost 2 pc in November and 0.1 pc so far in 2 weeks of December. This points out to some kind of correction rather than a top being formed.

4. Historically, the markets either correct in the Jan-March quarter or heavily correct in May. The rally will continue unless some really bad ews comes on US Fed tapering.

5. The support levels for the markets come at 6245, 6193, 6141, 6076 and 6061. Oly below 6061, oce can say the correction will extend much further down.

6. The tax free bonds have been drawing a good response and it would be a good idea to lock in some of the money in those while the rates are still high.

The markets usually never crash in December and it is time to enjoy the winter chill and watch the markets meander their way up.

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Election Results indicate a clear anti-Congress wave

The ballots are counted and the victors have been declared. Who are the real winners and the losers? Are the election results a mirror to what is going to happen in the next 6 months, general elections? Let us try and explore. How will the markets react? Lot of questions to answer.

1. First things first. Whatever be the minor change in positions after now, the message is clear, the voters want the Congress out. The party has been almost wiped out in Delhi, in Rajasthan and Madhya Pradesh they have won very few seats. If the BJP can secure almost 2-3rd majority after 10 years in power in MP, it means Congress may eventually get wiped out from the Hindi heartland. Remember, no party can afford to remain out of power for almost 15 years in a State, the cadres start deserting the party.

2. In Delhi, the Congress will finish a poor third. This sends out a very strong message. The voters are fed up with the Congress. They will prefer anyone else but the Congress. Even the unkown Aam Aadmi Party will do. The results put the AAP in the best position of the 3 parties in Delhi. They can continue with their shrill rhetoric till the General Elections. As the Oppositio party, they can ask questions. If they had won, they would have to give answers soon.

3. Rajasthan has been a whitewash for the Congress. Losing a elections after 5 years in power is fine but this is a whitewash but with the opposition winning almost 75 % of the seats is a bit too much. The Congress may get decimated in Rajasthan.

4. The only silver lining for the Congress is the Chattisgarh elections. Here also, they had the advantage of 10 years of anti-incumbency factor, the sympathy factor for the massacre of their leaders and yet they are neck and neck with the BJP. A few seats here and there. No decisive mandate in their favor.

5. What does this indicate for the 2014 elections? A NDA led formation or a Third Front khichdi leading to instability. There may be 1 more general election about 2 years from this one. This reminds of the 1996 scenario where for 2 years we had the Third Front propped up by the Congress and then BJP coming with a mandate in 1998.

6. The ball will now be in Narendra Modi's court. If he can keep up the momentum and continue with the pace of rallies, the BJP may just be in power. Remember Modi needs just around 200 seats, with 200 seats the allies will come. Power is a magnet for the allies, idealogies be damned.

7. Where will the 200 seats come from? UP and Bihar are rich harvest states. Karnataka has Yeddyruppa coming back. Gujarat Maharashtra, Rajasthan, MP, Punjab, Delhi are few more friendly States. In the South, they would need Jayalalitha's support, and in Telengana the TRS support.

8. Now, where does that leave the markets? In the short term we would have the Santa Claus Rally if no tapering happens. remember, BJP victory is just a excuse, the rally is based on liquidity flows from abroad. The FIIs have already purchased 3500 crores worth of shares in the first week of December to go with the November net purchase 6500 crores.

9. The December rally also takes place as Fund Managers usually dress up their portfolios to get end of year bonuses. In the month of Jan-March, the markets usually top out and if they do not in May usually a big crash.

10. In the short term, watch how market behaves around 6357, if that is taken out then in a euphoria rush 6500-7000 on the cards.

11. The NTPC bonds were sold out in a day. The Hudco bonds and IIFCL bonds are still open. Invest for safe tax free returns.

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All Eyes on December 8th Results

The markets rallied smartly by 3 pc during the expiry week to close just below the 6200 mark. The Elections are on in full swing with Rajasthan going to the polls now and Delhi on December 4th. The next immediate trigger for the market will the results on the 8th of December which is next Sunday.

1. The heartening part of this rally is that even the mid caps have begun to rally. Voltas gaied something like 23 pc last week. All signs indicate Nov-Feb rally with a market top for the year being hit sometime around the Jan-Feb period.

2. With the G-Sec yields around 9 pc, the tax free bond issues of NHPC and Hudco opening next week are very lucrative. With the interest tax-free and yileds of 8.91 pc and 9.01 pc, once can lock away some portion of the income for the next 20 years. Historically, these are very high returns post tax.

3. Technically, the markets need to close above 6350 to hit new highs. The way the markets rebounded last week was very heartening and point to a move in the upwards direction.

4. The GDP numbers came in at 4.8 pc, taking the half year GDP growth to 4.6 pc from the first quarter growth figures of 4.4 %. I expect the full year numbers to be between 5-5.5 %. The second half of the year has good agriculture growth as well as Election expenditure. Elections tend to add to the GDP growth numbers.

5. The fiscal deficit numbers for the period April-October has already hit 84 pc of the full year target of 4.8 pc. This is worrisome and could mean more measures like divestments and the Telecom spectrum auction i January.

6. The upside to the markets may remain capped due to the outflow of these issues, as well as the tax free bond issuance. The upside is again heavily dependent on foreign inflows which again is tapering dependent.

7. The short term moves of the markets in the next 2-3 months, is all dependent on liquidity. The fundamentals will start settling down after the outcome of the General Elections in May 2014.

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Lack of Triggers for the Market

In the absence of any major decisive triggers for the markets, they continued to drift aimlessly losing another 1 pc for the week. Let us see if any triggers exist before the election results of the State Assemblies on the 8th of December.

1. The Talking Heads on Television continued to play games with tapering stoppage or no. This is a good game for traders. Short term movements of 100-200 points on either side are the norm.

2. FIIs have net bought 5600 crores for November so far and DIIs have sold 8200 crores. The markets have corrected by about 4.8 pc so far.

3. All eyes for any major swing will be on the 4 major State election results. As I see it, these results will have no major impact on the General Elections and are likely to favor the BJP in Rajasthan, Madhya Pradesh and Chatisgarh. Delhi should head for a hung assembly. The markets may take it as a thumbs up for the BJP and rise if the results favor the BJP. Worst case would be an equal split between the Congress and the BJP.

4. Technically speaking the markets have reached the 5 week low ema at 5996 and some bounce can emanate from these levels. If no bounce then the markets can touch lower levels, correcting the rise from 5701 to 6342. Levels in this case would be 5946, 5870 and 5829.Any fall below 5829 will be a harbinger of larger falls to come.

5. The area around 5850-5900 has a confluence of supports. They rage from the 200 DMA to the equality of last fall, to 38.2 pc retracement level of entire rally from 5118.

6. Pharma and IT stocks have led this rally and there would be no harm in booking profits in these sectors and taking the money home. Finally only the profits booked is the real profit. Rest all is illusory.

7. The bond yields are hardening at around 9 pc. At these levels, for a 2 year investment G-Sec funds are still a good buy.

Now, is the time to lie low and do detailed study to invest in quality stocks when the time is right.

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Correction Continues

The market continued its correction, dipping further by 1.4 pc. Let us try and examine the pros and cons of  the market movement.

1. The markets are correcting gently, about 4 pc from the Diwali top. This could just be a bull market correction, looking at the slow nature of the fall.

2. The FIIs have been net buyers for all the trading sessions in November 2013. Only, when they start unloading will the markets have a major fall.

3. The major question is why are FIIs buying? It is not becuase of Narendra Modi but the continued avaailability of easy money thaks to Quantitiave easing. The battle is to attract money to India.

4. Jaet Yellen will take over from Ben Bernanke in Januarary and her statements indicate the divish stace of hers. If that happend then get ready for ovember to Februrary rally.

5. The markets have support around 5850 - 5900 levels.

6. The next major trigger for the markets is the State Election Results on December 8th. A BJP sweep (even if there is no material impact on 2014 elections) will lead to the markets zooming.

7. The Gilt yields continue to trade around the 9 pc mark. Only those with a long term view can stick to Gilts.

The markets are entering a quiet phase and it can be the lull before the proverbial storm. Buy on dips and stick to Quality stocks.

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Correction in a bull phase

The markets dipped by around 2.8 pc for the week. The markets hit a new high for Diwali and since then have been correcting. Is it just a correction or is it something else?

1. The thumb rule is that the markets tend to react from the previous top. 6350 has been a sort of double top. It is natural that the markets react from here and then come back and blast through.

2. This has been an unusual correction, the large caps have corrected and the mid caps have rallied. This also means it should just be a correction before resuming the journey upwards.

3. The last meaningful correction was around 441 points. So if we extrapolate then we can correct till 5902.

4. Coming to fundamentals, what has this rally been riding on? Many talking heads claim it on the Narendra Modi effect. It is too early to talk about that. Elections are ot due till May 2014. A good 8 months away and anything could happen.

5. The markets have been rallying on easy money from abroad. The putting off of tapering, has resulted in flows of 3 billion dollars in October and November also about 1500 crores till date.

6. If tapering happens then the flows will stop and the markets will correct.

7. November to February is a period when the markets traditionally rally and hit a top in Feb-March. Let us see how this seasonality plays out this time.

8. The next major data point would be the State election results in December though that is not a relaible barometer for the National elections.

9. The G-Sec yields have almost touched 9 pc. Those ivesting for the long term can park their money here as a hedge when stocks correct to put the money back. The short term party is over though for Gilt funds. Oly those prepared to hang on for 2-3 years should invest.

10. This is a good time to clean up one's portfolio. If junk stocks rise, sell them without thinking twice. Ultimately only quality value stocks matter.

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Market on the upswing:Happy Diwali

The markets continued their solid performance and gained another 2.6 pc to close above the previous 2013 high. We look all set to challenge old highs and how the markets react from there will set the tone of the markets.

1. The PSU Banks joined in the party this week and now one needs to see if the beaten down sectors join in the party or the rally fizzles out. Sustained closing above 6357 will herald fresh new territories to be conquered.

For this Diwali, I would strongly reccomend Godrej Properties trading around Rs 370. It recently came out with a rights issue at Rs 325 and the promoters hold about 75 % stake in the company. It comes from the house of Godrej, one of the best run management in the country.

They have premium projects across the country and the safety net comes in the development of huge Vikhroli land bank. The Godrej group has mandated that all real estate development of Godrej group companies has to be through Godrek properties only. They are also getting into the lucrative redevelopment market in Mumbai.

The Vikhroli model will isulate the compay from any downsides. They build huge towers instead of current factories which are leased to IT companies. They get huge rentals while the ownership remains with the Godrej group.

This is a safe low risk bet for those who want to take a bet on the real estate segment also.

One could also look at Larsen and Toubro, India's premium infrasturcture compay. if the economy has to revive, L&T will benefit.

Wish you a very Happy Diwali and enjoy your Mahurat trading.

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Correction possible, but markets in an uptrend

The markets had a mild correction for the week, correcting about 0.7 pc from the previous week close. Overall, the markets are firmly in an up trend. Let us see what the pre-Diwali firecrackers are in store, if any.


1. This is a liquidity based rally and no mistake should be made about this. Once, the plug is pulled for whatever reason be it ease of tapering or hung parliament, the markets will collapse.

2. 1 leg up from 5118 is over at 6142 and the correction from it ended at 5701. If we are in a third wave up, then it can be a fast up move from 5701.
The first leg may be over at 6252 and we may correct to 6042, 5977, 5912. The up trend will be over at 5811.

3. The market rally is taking Pharma and IT stocks to new highs. We should wait and watch for the other stocks to join the party.

4. As I see the election scenario building some kind of Modi wave is surely building up. If that happens, then the markets will zoom upwards.

5. The 4 states which goto elections in November, their results will be out on 8th December which will be the key deciding factor for the rally.

Markets tend to rally in November to Feb period. If that is the case, then the markets may see new all time highs. The current scenario is that I am not putting in fresh money but selectively looking to book out profits.

A safe strategy remains to invest in fixed income and lock in the rates.

Alternatively, one can buy good quality stocks so in case the markets fall then one can always average them out.

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All set for new highs but.....

The markets continued to inch up higher by 1.5 pc to close at 6189. They are now within touching distance of 2013 highs and very near to all time highs. It looks like the scenario of 6500-7000 is playing out.Let us see what we can do in such a scenario.

1. The markets are close to all time highs but the broader market is down. When I look at my portfolio very few stocks are close to their highs. It has been driven up on the back of IT companies especially TCS.

2. Every rally has gotten narrower. This could either mean we have a sudden collapse one day or as we gather momentum, the broader market picks.

3. If we look at my older posts, the targets of 6500, 6800 and 7300. The broader markets may well pick up. The rupee seems to have to stabilized around 61-62.

4. The level of 61-62 is significant as it makes exports very competitive and at the same time the burden of imports is not too high. The CAD is shrinking and gold, silver imports have fallen.

5. The results have been surprisingly resilient and I do not recall seeing any particular poor result. The best results are out of the way ad the results declared late are usually the poorer ones.

6. The markets may get into a festive mode and continue rising. The FII money is back ad thanks to the shut down drama the quantitative easing ball has been further kicked down the road.

The strategy remains to stay invested and book profits at higher levels. It may not be too prudent to buy stocks now especially if one is not a too nimble footed trader.

Equity is just 1 of the asset classes and may not be perfect one to invest always. There are several tax free bond offering nearly tax free interest of about almost 9 pc. One can think of locking in the money in those too.

Gilt funds are also attractive but the rate of higher interest rates remains. 1 should be prepared to take short term losses if investing in gilts.

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US Shutdown, looming debt-ceiling and their effects on the Indian market

Since the beginning of this month, the US government has been in partial shutdown. That means all government services and activities barring a few emergency and security services have come to a halt and government employees have been asked to proceed on unpaid leave. Why?

I had written a guest post for Subhankar which can be accessed here:
http://investmentsfordummieslikeme.blogspot.in/2013/10/us-shutdown-looming-debt-ceiling-and.html

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Infy surprises, US deadlock continues

The markets continued with their upward march to end the week with a gain of 3.2 pc. Infy had surprisingly good results (My unscientific analysis went for a toss) and the markets looked to be in a festive mood.

1. The IIP results came out after market hours. They were poor but that mainly due to poor Capital Goods data. The Capital goods data was very good in previous 2 months so normalized.

2. The US Gridlock needs to be resolved by by Oct 17th. India is a winner either ways. The longer the gridlock continues, the longer the easy money will be available.

3. Janet Yellen is a dove. She will not pull the plug on easy money so far. Enjoy the rally as long as it lasts.

4. 6142 if the market crosses then we are all set to challenge 6229 and then 6357. The figure of 6142 needs to be closely watched.

5.This will tie in with the pre-election rally, some experts are projecting. There can only be 1 rally, pre-election or post election rally.
This also points out to hung Parliament next year.

We live in interesting times. 6100 is not a time to make fresh entry ito the markets. Time to gradually book profits as we go higher. we all get chances to buy at lower levels.

Couple of months back, markets did visit 5118. The markets are always going to remain here and we all with get fresh chances. Impulsive buying can lead to losses and regret.

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Waiting for Triggers

The markets gained 1.3 pc to close at 5907. The markets rallied smartly on Friday only to give back all the gains. The markets are currently awaiting fresh triggers. Let us try and examine what they could be.

1. The Results season is upon us.Infy Results will be upon us on Friday 11th October. They will set a trend for the markets.1 non scientific observation I have made is Infy Results usually on a Friday are quite bad. Lets see if the trend continues.

2. The US Government shutdown is still going on. If not resolved by Oct 17th, the debt ceiling will be breached leading to further problems. The markets are awaiting resolution to this problem.

3. The Rupee has strengthened to about 61 and if this continues then the stock markets will continue to do well.

4. Technically, the Nifty must clear the 5950-6000 range convincingly to go up.

5. October is a long series and it has often been seen in such long series, the markets are dormant over a period of time.

6. The bonds seem to be settling in the 8.5 % to 8.7 % range. Real recovery will not start until the bond yields come down to 7-7.25 pc range and the interest rates begin to fall.

The 3 options posted in last week's post still hold good.

From here, where the markets can be anybody's guess. There are 3 options:

a. Straight up from here (Least Likely)
b. Correct to 5500 levels and then rally up
c. Continue with the long term correction.

Options b and c have equal likelihood of occurring.

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Sideways Market awaits H1 Results

The Nifty closed about 3 pc lower for the week. After a massive 1000 point rally from 5118, the index seems  to be cooling off as the breadth becomes narrower and narrower.

1. The news flow seems to have been exhausted for the markets. After the rapid movements of August and early September, the indices are cooling off which is a good sign.

2. From here, where the markets can be anybody's guess. There are 3 options:

a. Straight up from here (Least Likely)
b. Correct to 5500 levels and then rally up
c. Continue with the long term correction.

Options b and c have equal likelihood of occurring.

3. If it is just a correction, targets are 5751, 5630 (significant number) and 5510. Below 5323, we could conclude that the rally is over.

4. Fundamentally, nothing has changed. In fact the rupee has strengthened and is now at a level where exports are competitive and imports not as expensive as 68.

5. All fresh buying should be held back till we hit slightly lower levels or if previous highs are taken out.

6. The Results season will again dictate the market direction. The Q2 Results will not be very good for many companies (except IT companies). This is because the maximum brunt was felt in Q2.

7. The FIIs flow while they have been positive, they have been buyers in small quantities.

The markets seem to be in for a quiet time. Maybe, the lull before the proverbial storm.

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Markets at Key Point

The Markets rallied on hearing the FED will not halt Quantitative easing and fell on the RBI policy. The markets closed up 2.4 pc for the week. Let us look at the Technicals and Fundamentals.

Fundamentals:

1. With easy liquidity on tap, as long as FIIs buy, the markets can go up. There were 2 main irritants, Syria and the FED stopping the easing.

2. The drama over shut down in US over spending and H1 Results can be negative for the markets.

3. The RBI has made it clear for the moment, it has done what it could have done. No more cues at least in the short term from the RBI can be expected.

4. The market may move sideways for sometime in the absence of any cues.

Technicals:

1. The markets have gone up much above the 80 pc retracement of 6229-5118. This could mean we could correct a bit and head for new highs.

2. Targets on the down side could be 5900, 5750, 5630 and 5509.

3. Below 5866, we can be sure of a deeper fall to the above levels.

The Strategy should be to stick to Quality Stocks which can be held even if the market collapses. Do we have the pre-election rally or post-election rally.

I would rather prefer a post election rally for obvious reasons.

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News driven Week

The truncated week started with a big bang. The markets ended up with a net gain of 3 pc for the entire week. The coming week will be decisive for the markets in the short term.

1. The FOMC decision on tapering comes on Wednesday (our markets will get impacted on Thursday) and we have our RBI policy on Friday the 20th.

2. Both are news based events and it depends on what the FED says. My guess is some amount of tapering will be announced.

3. 6000 is a key resistance beyond which we may scale new highs.

4. Any rally has to correct. The current rally can retrace till 5621, 5525 and 5428 and still continue higher. A higher bottom needs to be in place.

5. The Thursday after next is Options expiry. Many times, just about 7-8 sessions before expiry the markets go in the opposite direction that they have been during the month. This gives the big time writers a escape route. So we may have a small dip coming.

6. We made most of the gains on Tuesday and spent rest of the week around that range. This indicates that the rally needs a breather. A correction would be considered healthy.

In a nutshell, trade cautiously as up side seems limited before some sort of correction. Of course, it could well happen that the markets rally higher till 6000-6100 before correcting. Any sustained closing above 6000 would indicate that new highs may be in the offing.

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Relief Rally On

The markets have bounced back well from 5118 to rally almost 570 points. Let us see what the next steps for this rally could be.

1. The entire range from 5720 - 5800 has a lot of resistances. The golden ratio for the fall from 6093 comes at 5721 and for the entire fall from 6229 comes at 5804.

2. The 200 EMA comes at 5724 and the 200 DMA comes at 5834. The 50 DMA also comes in at 5704.

3. The current up move can lead to new highs if we cross the 6000 mark.

4. We have taken 9 sessions  to fall from 5754 to 5118 ad so far 7 sessions to reach 5680. If we cross 5754 within the next 2 sessions which would mean faster retracement of the last falling leg and can be bullish.

Nothing has significantly changed in the last few days except a speech by the new Governor. Let us wait and watch how the markets react. The real test begins now as the markets approach key resistance levels now.

At the very least, this week could see the onset of a 200-300 point correction in the markets. This week has key FOMC meeting where the tapering of fiscal stimulus cues could be got, Syria attack by US and RBI meet on 18th of September.

Remember the markets fell because of FOMC tapering the stimulus ad also because of Syria attack.

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Trend lines: What do they say?

The markets closed the week flat to end the month of August with a fall of 4.7 pc. Let us see what is in store for the month of September.

Since, fundamentals do not change every day or every week to a very large extent, this week, I tried to capture the trend lines in 3 different time frames.

1. Daily Timeframe:

We are very close to breaching the down ward sloping trend line from 6093. Breach of this upwards means the whole down move may be over and we may be in for some large retracemnt of 6093 - 5118.

The targets could be 5490, 5605, 5720 or 5898.

2. Weekly Timeframe:

Above 6000, this entire down move will be over and we will head for new highs.

3. Monthly Timeframe:

Since October 2008, we are trading in a narrowing range. The break points are 5300 and 6300. A break of either sides will give a 1000 point fall or rise.

Breach of 5300 will lead to 4300 and breach of 6300 gives us 7300.

The month of September has given large moves in the past, and hence we need  to be careful. 5000 or 5800 could be the targets.

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Settlement Week to drive the Markets

The markets had a sharp dip followed by recovery in the later part of the week to end at 0.7 pc down. The Rupee, Government Bonds and the markets all recovered towards the end of the week.

1. The Equity Markets will have their monthly settlement on the coming Thursday. Many times during the time before settlement, markets move in opposite direction to how they have moved throughout the month. This is a thumb rule and need not be the case always.

2. The Markets have over reacted and there could be some recovery towards the mean. The markets always tend to over react in either direction and then pull back towards the fair value.

3. The Monsoon Session will continue and this may be the last few sittings of this Parliament to get any meaningful work done.

4. The current levels were strong supports in previous falls and typically supports turn into resistances and vice-versa.

5. Export oriented stocks will do well with the fall in the Rupee

6. The Retracement levels to watch out will be 5504, 5563 and 5654 all historically key levels too.

7. The FIIs have kept on selling now. That is the figure which may keep the up moves in check. The markets move in strange ways. In early August when the FIIs were buying they kept falling and now when they are selling, the markets are rising.

The Strategy remains same. Use the high yields to park money and wait for lower levels to buy stocks.

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Who sold on Friday?

The markets tanked on Friday thus undoing the gains of the entire week in 1 week and closing the week a net 1 pc down. What led to this panic fall?

1. The surprising part of Friday's fall was that there was no big gap down. In fact the market was trading mildly negative for some time. The usual suspects of FIIs have been blamed. The FIIs sold only 600 crores of shares and DIIs bought 732 crores.

2. Even more surprisingly, for the month of August the market is down more than 4 pc but FIIs have actually bought 1400 crores worth of shares.

3. This would led to rest speculation that the FIIs are to be blamed for the markets downfall.

4. Also, the US bond yields have risen to 2.71 pc. This would lead to lesser inflows into India as last year the yield was only 1.72 pc and it has risen to 2.72 pc. This makes it a safer bet to invest at home and ot worry about depreciating currencies.

5. In technical terms, the markets still have to break critical levels. The 5400-5500 band has lots of supports and breaking of these levels and closing below them on a weekly basis only would confirm major downsides.

Strategy:

We do not know the tops or bottoms of markets. In such a scenario, it is best to identify stocks and keep averaging them. Like if you buy 20 pc of your targeted quantity at 5500, for every 300 points lower keep adding another 20 pc. So, you will end your purchases theoretically at 4000.

The oly key is to stick to good quality stocks. If the Tiscos and the SBIs of the world are available so cheap why go for second and third rung stocks.

In any case the pre-election gap of 3800-4400 should be the floor in the worst case scenario.

The bod yields are also up at 8.9 pc. I do not think they ca up much higher else industry will suffer. Interesting times ahead for the markets.

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