Awaiting Fresh Triggers

The markets corrected about 0.4 pc last week. A Delayed markets and a lack of clear direction from the Government weighed heavy on sentiments. Let us try and explore what could be the factors influencing the markets.
Technicals:
1. We are in the Leg C of the corrective up move. This has targets ranging from 5700 to 5900.

C started at 4770. There are 2 possibilities here.
a. C1 4770 - 5190
    C2 5190 - 5041
    C3 -1 5041 - 5348
    C3 - 2 5348 - ???? can be 5231, 5195 or 5159 or max 5102.

b. C1 is 4770 - 5348 and C2 is currently ongoing with targets of 5127, 5059 and 4990.

Technically, wait for the breach of 5100 to commence fresh buying.5100 is a strong support area.

Fundamentals:
1. Poor monsoons are already driving up food grain prices. The chances of a rate cut are diminished. Sugar stocks are expected to do well. The bumper harvest of previous years will help India in tiding over this drought.
2. The markets will not move up till there are further steps on the economic reform front. The Presidential elections are out of the way. It is now time for the Government to deliver.
3. Worries on the European front are resurfacing. One needs to keep a look out for the developments in Spain.

The Sriram Transport NCD is due soon opening on July 26th 2012. I will post a detailed review on the 25th of July.

For those interested in stock picks, I have Lakshmi and mine Cherry Picks.

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FIIs lead the way

The Markets have been consolidating for the past few days. They closed 1.7 pc down for the week but I expect them to break out of the range soon. Let us explore why this can be a reality.

Fundamentals:

1. The FIIs have been buying heavily in July. They have bought equity worth 6500 crores so far. This has eased the selling pressure on the stocks.
2. The global commodity prices have remain subdued. Crude has settled around the 100 dollars a barrel mark. India which imports almost 80 pc of its crude, is the major beneficiary of this.
3. Global negative events, especially in Europe are taking a breather.
4. Post the Presidential election on June 19th, there are expectations of major reforms. FDI in Retail, GAAR norms easing and the Vodafone tax case are a few of the reforms expected.
5. The progress of Monsoons is another key factor in determining the direction of the monsoons. Monsoon activity has revived over the past couple of weeks.

Technicals:
1. As per Elliot, the market is in the 3rd Corrective upmove from 4532. A was 4532 - 5629. B was 5629 - 4770.
2. The Leg C has completed the first 2 legs. C1 was 4770-5190  = 420 points, C2 was 5190-5141 = 149 points.
Leg C3 has completed the 1st wave from 5041 - 5349 = 308 points. 2nd wave will have targets 5231, 5195, 5158.

It is a buy on dips markets. For those interested in stockpicks which have done pretty well, we have the Cherry Picks.

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Consolidation after the Up Move

The markets gained 0.7 pc for the week and what was more important was that the markets are consolidating their position before commencing the new up move.The next few week should very bullish for the markets and let us investigate the levels which the markets can reach during this period.

1. On the reforms front, there seems to be a silver lining with the PM showing positive intent. A final decision on the Vodafone tax front case will lead to a rally in the markets.

2. Oil is holding on at lower levels and this is a big positive for the markets like our markets.

3. Technically, we can map this rise as Leg C.
Leg C -1 was from 4770-5190 = 420 points
C-2 was 5190-5042 = 148 points
C-3 ongoing with targets of 5462 or 5721 points.

4. The Sugar sector looks extremely positive. Brazil has seen heavy rainfall which has lead to decrease in sugar output and India is witnessing scanty rainfall. Sugar sector seems to be looking good for next few months.

5. The Q1 results will be out from this week. Usually the results are factored in the prices and unless we see very good or very bad results, the results are usually discounted in the market prices.

6. Considering the rally so far, the indices may take a breather early next week before peaking out for

As I see the interest rates coming down, this will be last chance to lock in high interest rates. I can still several banks giving high interest rates on 3-5 year maturity. Profits from the equities can be locked in these FDs. The Gilt funds which I have been recommending for long have given fantastic returns in the past 2 months. The 10 year bond yield has come down  to almost 8.1 % from the near 9 pc levels.

For those interested in Equity picks, I have Lakshmi and my picks. We are sweetening our Cherry Picks with some sugar picks.

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Leg C commences upwards

The markets closed about 2.6 pc higher for the week. It has finally broken out of a range and looks to be moving ahead. Let us look at the factors which can move the markets in the coming weeks.

Fundamentally:
1. The Government seems to be showing signs of moving out of policy paralysis. The PM taking over the Finance Ministry and seeming to reverse key prickly issues like the Vodafone Tax case and a re-look at GAAR. This will boost FII sentiment.
2. The crude oil prices are hovering between 95-100 dollars a barrel. The Petrol prices in Mumbai have already come down by about 5.5 rupees post the hike by Rs 7.5. Further strengthening of the rupee will leave scope for further reduction in petrol prices. Every 1 rupee strengthening of the rupee against the dollar should lead to a drop in petrol prices by out 0.74 p
3. Monsoons hold the key. Monsoons have been deficient so far. If the trend continues then the markets may witness a fall. It has been observed that for the past few monsoons are delayed by about 15-20 days. The monsoons start late and end late.

Technicals:
As per Elliot, the entire move from December 2011 can be categorized ito 3 legs A, B and C.
1. Leg A was 4532 - 5629 an up move of 1097 points. It was corrected by B leg down to 4770. B corrected A by 78.4 pc.
2. Leg C can extend anywhere between 5447 to 5867.
3. Leg A took approx 2 months, Leg B consumed about 3.5 months. Leg C should consume about 2 to 3.5 months. This up move should end in the time span of about August beginning to about mid-September 2012.
4. The area between 5094 and 5150 will act as strong support now.

Conclusion:
The Strategy now should be to go long on all dips with a stop loss of 5094 and a target of 5450-5850. After 5450, one commence part booking of profits once the markets cross 5450 levels. 1 strategy could be booking 10 pc profits for every rise of 50 points from 5450. By this strategy one would have liquidated the portfolio by 5900-5950 which forms the upper limit for this up move.
For those interested in individual stock picks, I have Lakshmi and my picks

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Expect Action after the expiry

The Markets absorbed all the positives and the negatives for the last week to close a mere 0.1 pc up Let us try and chalk the road ahead for the markets.

1. A major overhang of Greece is out of the way at least for the time being for a couple of months. This does away with a big negative factor holding back the markets.
2. The RBI policy came and went with no change. The fact that the markets did not tank on no cuts bodes well for our markets.
3.Crude oil has continued around the 90 dollars a barrel mark. This bodes well for the country i terms of import prices. I expect the Petrol prices to be cut by another 2 rupees by this week.
4. The monsoons now represent a key trigger for the markets in either direction. While the monsoon has been delayed it has not been a complete washout either. There still remains hope.

Technical factors:

1. I would put the markets in a Technical bull run on a sustained close above 5227. The markets can from here do 3 things:

a. Re-test 4770.
b. Do a corrective to this up move till about 4900-4950.
c. Continue up to 5270-5350 before doing a correction.

So what does one do in this case?
4900-4950 are safe buying zones with limited downside risks. For those interested in indivdiual stock picks, I have Lakshmi and my picks

One should focus on Dividend yield stocks as they offer a margin of safety from the downsides.

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Make or Break Week Ahead

Very rarely in recent times have so many events been stacked up together. The early part of the week will decide if the markets will continue their ascent to 5600 odd levels or there will be a dip to 4800 levels and below. Let us try and dissect each event and find out the implications of each.

Fundamentally:
1. The Greece election results should be out by Monday.Why are these results so important? The reason is that the party coming to power will decide whether to stay in the Euro zone or not. If the Greeks decide to exit the euro it may lead to the unraveling of the Euro. There are various parties in the fray both pro and anti austerity. If the radical Syriza comes to power than the markets may tank.

2. The RBI mid quarter review is set for Monday. The markets have factored in a 25 basis points cut. Anything more and the markets may rally. If there is no cut than the markets fill fall especially the Banking stocks.

3. The US Fed meets on Tuesday and Wednesday. There are expectations of a third round of Quantitative easing or fiscal stimulus. If no announcements come, the markets will fall globally.

4. The election of the President of India has seen the announcement of the UPA nominee as Pranab Mukherjee. The next question is who will replace him as the Finance Minister. If the PM keeps the portfolio with himself, then the markets will view it favorably.

The Crude oil prices remaining below 100 dollars a barrel are a great relief to the government. If the trend continues, then the probability of stocks going up greatly goes up.

Technically:
The question is has the Leg C upwards commenced. Leg A was 4532-5629, B was 5629 to 4770. The moot point is correction over?
1 view could be that the last down leg remains to re-test 4770 before the up move. The second option could be that leg C has commenced up. This would be confirmed above 5150 and 5227.
As I see it, any correction between 4900-4950 is a good chance to add up stocks.

Many stocks are going to be ex-dividend in the next few weeks and give an opportunity to load up on. For those interested in stocks, we have the stock picks from Lakshmi and myself.

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Will the bounce continue?

The markets had the best week, this calendar year and bounced 4.7 pc to close almost at the high point of the week at 5068. Can the bounce continue? Let us look at few technical and fundamental reasons which can impact the markets.

Technicals:
1. The 50 DMA is at 5090 and 200 DMA is at 5066. These are the immediate 2 resistances for the markets to scale.
2. If we consider the fall from 5342 as 1 leg, then the 50 pc retracement is 5056 and 51.8 pc retracement is at 5123. Also, for the entire fall from 5628, the 38 pc retracement comes at 5098.
3. The markets are touching the upper end of the Bollinger Bands showing immediate overbought positions.

From the above Technicals, we can note that fresh buys can be considered only on a closing above 5125. If we consider downsides from here as a corrective, then the targets can be 4964, 4927 and 4889. One can consider long positions at 4964 and 4927 with a stop loss of 4889.

Fundamentals:
1. The Crude prices further stabilized at around 100 dollars a barrel. If this sustains then the petrol prices can be further reduced. In fact, the price before the hike of Rs 70 was the correct price for the Petrol.
2. Growth has faltered making a rate cut more likely in the next meeting of the RBI in June.
3. Spanish banks have received a bailout thus preempting a Spanish economic crisis for the moment. All eyes are on Greece with next Sunday's crucial elections.


If parties supporting a move to stay within the Euro win the Greece elections, expect the rally to continue. I expect the week to be a quiet week in anticipation of the results and also domestically waiting for the progress of the monsoons and the RBI policy meet decision.

Taking Elliot into consideration, I feel there are 2 possibilities:
1. Of the XYZ move from 4532 in December, we have started the last leg up with targets of 5650-5850.
2. Y leg down is still continuing, and we are Y-c-b. That is a corrective up move before a last fall to around 4650-4750 levels.

So, what can one do? Restrict buying levels around 4900-4950 and invest in good dividend yield stocks.

The reason, I say so because in any case I feel a test of 4900-4950 is due before a fresh up move.

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