Elections over: What next?

The public has voted. All the votes have been counted and the winners take away the spoils. It was the best possible verdict (other than clear NDA victory).

The people who held the country to ransom have been shown the door. Manmohan Singh has proved to be a much better politician than most. First the nuclear deal and then this. If we break the results down, the Congress has won mainly because of UP, Kerala, WB, rajasthan and AP.
The real surprise has been AP and they deserve to win, they saved Satyam. Satyam going down would have been real bad news for Indian IT.

The real worry is now that the Congress should not fritter away this mandate like they did in 1984. The next big event lined up domestically is the Budget and the Monsoons. Busget will take at least 2 months to be prepared, and good monsoons should be here in a months time.

Domestically, things seem to well settled now. The Budget would be interesting because all the freebies will have to be balanced out.

The only missing puzzle are global cues. This rally has been fueled by FII money and till they stop pumping in, the markets will keep rallying.

Monday, the markets will gap up 700-800 points. Now, what do you do at this point?

Typically, it is classic sell on news. The smart money had already poured till this stage. At 13000 sensex, nifty 3950, the trailing P/E would be around 19.

Just look at the charts after the Nuclear deal vote of confidence, the markets peaked the next day. We still have not reached nifty 4620 after that.

It would be best to wait for markets to cool in. It would now be retail money jumping in. They are typically the last to get in. There would be definitely corrections on the way.

If the global cues, remain good we are headed to 14500 by July (factoring in good monsoons, which they should be, after all monsoons have failed only only 1-2 times in last 20 years).

If I had bought at lower levels, I would book some profits.If I have not bought, I would sit quietly. The markets always remain here. They do not go anywhere. Markets always give everyone a chance to buy.

There would be a dip after the euphoric rally on Monday.

I would wait for that dip to buy.

Remember the primary goal of investments should be capital preservation. At 13,000, valuations would look stretched. (8K to 13 K in 2 months)

For the moment, time to celebrate.

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The Rally Continues.......

It was a super Thursday, the markets just rose and rose on good volumes.

Is this the new bull run?

The Markets has rallied on lots of dollars being pumped. Now, 1 more trillion is going to be pumped in as per the G-20.

Either Obama is going to spectacularly succeed or spectacularly fail.

The Toxic asset waste if the government wanted to solve it, they could have bought the entire toxic asset. Now its a gamble with the private sector being a party to the deal. So who will do the valuation. Some one will be left holding the baby again. Will it be the Buyer or the Seller?

We just need some derivatives on this bundled toxic assets to start the game again.

The next trigger points are Results season in US and India. In India, Infy will kick it off around April 10-13th and on Monday, Alcoa kicks it off in the US.

The markets in 4 weeks have gone from 2539 to 3228. I dont believe the fundamentals have changed so fast.

The auto sales have been good last 3 months on lower commodity prices. The auto results should be good so as the IT on rupee depreciation. I would like to see Infy guidance though.

My sense is the markets will take a breather come to Nifty 2800-2950 range and then take off again.

If I was an Operator thats the best trap for retail and dump some shares on them. Operators dont make money if they take markets straight to 1800 or straight up to 6350. There have to be twists and turns.

I would now focus on buying Gold in this period. If rupee strengthens a bit and world price correct a bit to below 900 dollars, I will get Gold at around Rs 14 K.

I would wait for the Elections results before diving into equity. Also, the Geithner plan results will show up in next 2-3 months.

Mid-May to end June will be interesting period. We have the election results as well as US plan results.

Next G-20 might as well have Mayawati addressing the world. Something to think over.

That time, we would see. When hope is destroyed the markets can collapse.

Too many people said in March (including myself) that the markets will hit new lows and they didn't.

Too many people are getting convinced we have hit the bottom (Not myself), the markets may surprise again. This time on the downside.

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The Political Games begin

Hi,

It was a positive week for the second time in a row for the markets.

The year nav pumping is on full swing. Coupled with the Put writing at 2700 strike price for March expiry, 2700 looks to be holding for this expiry.

The PCR is 1.59. With such amounts of Puts being written, someone may just have other plans in mind.

A sharp fall from this level will have the Put writers running for cover.

For the past few months, the option writers have much huge chunks of money by the range bound movement of the Nifty.

Remember, 1 fall will take away all their earnings. The same thing had happened in Jan 2008. The Put writers made hay for several months, then 1 month took away all their profits.

Always 1 should stay have from naked option writing.

The Political scene is becoming more and more complex. Hung Parliament seems to be the inevitable result.

1. The Congress will be weakened by the split in the UPA in Bihar. I see Nitesh Kumar a clear winner from the division of UPA Votes. The split in Uttar Pradesh between the Samajwadi and the Congress will strengthen the hands of Mayawati.

2. The BJP is not doing much better either. The Arun Jaitley - Rajnath spat will weaken its chances. Orissa also will be a problem.

3. Chiranjeevi may pull a few rabbits out of his hat in AP. He will definitely not join the UPA because of anti-Congress stance. He may well become part of the NDA.

The scenario looks very plausible, that a non-Congress, non-BJP Third Front coming to power with no agenda except further looting the country.

We all know how the stock markets will react to it.

My strategy will remain simple. Stay on Cash and buy at 7500-8000 levels. And keep at least half the funds in hand till the elections are over.

We are just now entering the era of deflation. The pain on the street starts now. In the past 1 month, the real estate prices have started cracking finally in mumbai and suburbs like Kharghar.

Real Estate starts cracking when the stock market is near its bottom because of lag effect.

We may have the bottom for the markets soon in place. Remember markets are at least 6 months ahead of the real economy. If the economy is to show recovery post the harvest season (Kharif crop), the markets will bottom out in a month or two.

Caution remains the buzzword. Bear Markets are rallies are sharp, furious and short. I dont see the markets going up much higher from here in the short term.

2 things can happen from here:

1. A straight drop to 2400-2500 levels.
2. A small dip, some more rally and then a drop.

Either ways we seem to be in for lower levels.

The markets tanking after this rally, will remove the last optimist from the market. That is when the bottom is formed.

Even in this rally in our group, I see the number of people buying stocks dropping sharply from previous rallies. Another indicator that the bottom is near but not yet formed.

The last bit of hope is still there. It needs to be crushed to form the bottom.

Thanks,
Nishit

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