Week Ending 18th September 2020

Dear patrons, yet another lackluster week went by without much action in the markets, barring a very eventful last one and a half hour on last trading day of the week. In last couple of hours of trade during the last trading session, markets saw a big sell off. Nifty and Bank Nifty both bore the brunt of this sell off losing a lot sharply. Bank Nifty was severely punished losing almost 300 points in less than 5 minutes.

The fall in Nifty was attributed to the Indo-China confrontation on the Eastern border and a second front likely to open on the western border. Also, the FOMC commentary in the US was a bit hawkish sending the US markets down impacting global markets. 

Nifty followed the pattern that we suggested in the last blog. Nifty went to 11550-11600 range during the week twice and rebounded sharply on both the occasions. In the first instance Nifty turned from 11568 to move below 11400, though it turned sharply during further sessions to achieve 11600. After closing marginally above 11600, Nifty again started to correct closing the week a tad above 11500.

Bank Nifty, on the other hand remained in a range of 22700 to 22000, mostly remaining volatile. Being the biggest contributor to the Nifty, any move in Bank Nifty has a big impact on the Nifty. Banks and NBFCs lost sharply Friday with many closing with a big negative tick.

The Pharma index managed to hold on to impressive gains during the week, keeping Nifty afloat amid the avalanche in the Banking space. We expect the pharma companies to do well during the pandemic and even after it is over. It remained a silent spectator during the Banking, IT, Engineering, Auto rallies, now time has come for the pharma sector to show some gains. Investors, however need to chose and pick stocks in this sector. 

Coming back to Nifty, Nifty remains weak as long as it trades below 11600. The current formation is hinting at a fall in Nifty towards 11300-11200 range, with 11000 acting as a strong support. One needs to be cautious in taking a trade in the current environment. We saw huge selling in Index Futures on Friday and  it might just be the start of the fall.

Many big-wigs like SBI, Kotak Bank, Reliance, HDFC twins, L&T et all are looking weak on the charts. There may be space in these stocks on the downside. Banking in particular looks vulnerable on all time frames and may correct further.

Be choosy in buying stocks at the current valuations. Investors need to be extremely cautious and nimble footed for the next month or so. Mantra remains the same, accumulate good quality stocks.

Stay Invested!!!

Happy Investing!!!

Week Ending 11th September 2020

Dear patrons, the week gone by was a lack luster affair for the markets. Moving in a narrow range of 300 points the Nifty managed to close in the green for the week, with minuscule gains. There was no trigger for the market to go up or down. The week was pretty slow on news flow as well as events.

The Nifty managed to touch low of 11185 during the week on the back of massive sell off in the US. Correcting from all time high the Nasdaq and the S&P both indices lost heavily in the sell off. The fall reverberated in the global markets, wherein all the markets lost considerable ground. Indian markets were no exception, though they recovered quite sharply. The Nifty managed to bounce back and closed the week a tad above 11450. We had mentioned in the previous blog that Nifty should find support in 11200-10800 band.

Rally in the markets was mostly ruled by Reliance Industries. Reliance rose sharply on announcement of offering a 20 bn USD stake to Amazon in its Retail arm. Reliance is already a debt free company. If the deal with Amazon goes through, it will have expertise as well as reach. Reliance now has bigger market cap than all IT companies on the Nifty combined. Banks also played a part, although a very small part, in the rally.

There are two scenarios that may unfold during the coming week. We will see them one by one.

Scenario 1. Nifty has achieved its upward target and likely to resume its downward trend. In this scenario as per wave theory Nifty may drift towards 11200-11100 range. The following pic. illustrates the point.

Scenario 2. Nifty is yet to complete its retracement and may move up towards 11550. Once Nifty reaches 11550-11600 range it may start the fall towards 11200-11100 levels. The following pic. illustrates the same

One should be prepared with a contingency for any eventuality. Chances of a fall are more than rise. Plus chances of higher movement on the downside than upside are more. One should pick stocks which are fundamentally strong.

New regulation from SEBI has made it mandatory for mutual funds to hold 25% of their portfolio in small cap stocks and same with large cap stocks. This may bring some unwinding in index stocks by mutual funds resulting in fall in Nifty. Markets are already in fragile state due to new margining system, geopolitical tensions with China, the new regulation may prove to be a dampener.

All in all chose fundamentally good stocks. Invest in SIP mode.

Stay Invested!!!

Happy Investing!!!

Week Ending 4th September 2020

Dear patrons; first of all let me apologize for being on and off regarding this blog. The week gone by saw heavy sell off in global as well as domestic markets. The speed and quantum of fall was quite sharp. We will see what transpired in the markets one by one.

India's GDP numbers were announced at the start of the week. For Q1FY20-21 Indian GDP declined by a whopping 23.9%. Almost all sectors saw double digit decline barring the Agriculture sector. Construction and manufacturing bore the worst brunt of the decline falling by around 50% and 40% respectively. The fall in GDP growth was more or less anticipated on the back of the lock down imposed in the country for the entire quarter. The markets were not impressed with the fall and lost more than 2% on the first trading day of the week. However, the Chief Economic Advisor's statement that the economy is witnessing a V shaped recovery, gave some hope to the markets and the Nifty rose mildly in the following sessions.

The fall in GDP growth is a worldwide phenomenon. All the global economies lost sheen due to the Chinese Virus pandemic that holds the world by the scruff of neck, stopping all economic activity across the globe. The pandemic is far from over and we may witness further economic distress in various sectors like Aviation, Hospitality, Tourism etc., which in turn will culminate in big distress in the banking system. The road to recovery is not as bad as in 2008 though. Like during the subprime crisis, this time there is no dearth of finances at various governments' disposal. Governments around the world are pumping in huge liquidity in the system, thereby keeping the markets buoyant. In all likelihood we should see a vaccine for the Chinese Virus around November, which gives solace to the entire mankind.

Apart from Chinese Virus, Indian markets are also unnerved by the geopolitical tensions with China on it's Eastern border. There have been little skirmishes resulting in deaths of soldiers, the situation however remains volatile and may result in a limited war like situation. China's expansionist behavior needs to be restrained and India can take lead in that endeavor.

Let us turn our attention back to the markets. Nifty lost almost 3.5% in the week gone by, marked by big falls and small recoveries. The week started off with a multi month high opening but it lost its way midway through the day losing heavily on high volume. Mid week saw mild gains for Nifty amid average volume. The week ended on a somber note following global cues and losing close to 2%.

We can see in the above image, Nifty was forming a rising wedge, which has been broken from the downside at the start of the week. The gates are open for further fall for now with impending targets in the range of 11200-10800. For the time being Nifty looks fragile. One needs to be nimble footed in trade adhering to strict stop losses.

Focus should remain on fundamentally good stocks with an accumulation mode.

Stay Invested!!!

Happy Investing!!!

Week Ending 26 February 2016

"Money is the most egalitarian force in society. It confers power on whoever holds it" ~ Roger Starr

Dear Patrons, the week gone by, was an eventful week. We had the expiry of the February contract in the derivatives market and the Railway Budget on the same day. This week was very volatile, with Nifty marking big swing downwards. Nifty started the week around 7200, made high of 7252 and then slid to 6961 losing all the gains made in previous week.

Next week starts with a BIG event for the markets, as we have The Budget on Monday. As we head into the Budget, we would like to advice caution and avoid leveraged positions till the event is over. 

Technically, Nifty is in the process of forming a bottom. Should 6950 hold on Nifty, we may see 7350 in a hurry, on breaching 6950, however we may see the previous low breached.

Today, that is on 26 February, the GoI published the Economic Survey. The readings from the Economic Survey paints a rosy picture about the Indian Economy, which, we have been saying for long through this blog. We have always maintained that small steps taken by the GoI will result in large impact on the Economy, and we have been validated by the Economic Survey.

Let us look at some data points.

1. Fiscal Deficit: In the last Budget the target for Fiscal Deficit was fixed at 3.9% of GDP and the Government has largely managed to keep it in check. 

2. Inflation: Inflation has by and large remained in check, mainly due to decrease in Crude prices and high interest rates. Looking at the inflation data, we feel RBI has room to cut rates further and boost the economic activity

3. IIP: IIP has been on a steady path of growth and with increased impetus on Make in India, we should see better industrial activity in future

4. GDP: India is the only shining star in the globe in the current recessionary scenario in the developed world. We expect to grow by 7.5% next year, which is a fabulous growth, in the bleak global outlook

5. Forex: There has been steady growth in Forex Reserve, though not satisfactory, it has increased. We should see more money coming in India over next year, which in turn should help the INR gain some lost ground

6. Agricultural Activity should see major thrust in this Budget, as we are reeling from 2 years of drought. 2016 however promises to be good as far as monsoon is concerned as the El-Nino effect is not present in this year. 

All in all we expect a good Budget, with significant allocation for Agri sector as well as Industry. Our motto remains the same. Accumulate good quality stocks.

Stay Invested!!

Week Ending 19 February 2016

Dear Patrons, welcome to yet another edition of the weekend blog. As we head into the Budget, lets have a look at what happened in the market in the last week and what is in store for the coming week. Today, we will look more at basics of investment than the markets. However lets spend some time on the markets first.

As stated in the last blog, Nifty failed to hold on to 7350, which resulted in a massive sell off in the markets. Thereby creating a panic situation. As they say, whenever there is a panic situation in the market, the bottom is near. Nifty slid to 6869 and recovered in the week to close above 7200. We like to believe that the worst is over for the markets and 6869 should be the bottom for this fall of almost 2300 points or 25% on the Nifty. If 6869 is considered the bottom then Nifty assumes targets of 7300 and 7500 in near future. 

Let us now talk about investment basics.

What is an investment?

The easiest answer to this question is "anything that gives a return over a period of time is known as investment"

What are avenues of investment?

There are many avenues available for investment, namely Bank Fixed Deposits, Bullion, Real Estate, Equity, Mutual Funds etc.

Which is best investment option?

This is a tricky question, the answer to this question depends on what are our goals and what is the investible amount available with us along with the time frame. We will look one by one.

1. Bank Fixed Deposits: These are perceived to be the safest investment option. It has a drawback though. The interest rate on an FD is less than 10% in India and assuming inflation rise of around the same nature i.e. 10%, the return on FDs does not cover the inflation let alone fulfilling goals.

2. Bullion: Bullion is also a safe bet, however there are issues regarding safety and purity of the Gold that we buy. Also it is a costly affair to invest in Gold, looking at current prices. 

3. Real Estate: Again a safe investment destination, but it requires bulk investible amount and is highly illiquid.

4. Mutual Funds: Mutual Funds have not been able to generate the kind of returns one expected over a period of time and liquidity is still a concern as far MFs are concerned.

5. Equity: First and foremost, its a bit risky if done without study. Equities, however, have given best returns when we look at the 80 year performance of all the asset classes. Also Equities are liquid and there is no threat of someone stealing it. Investment in Equities can start with a small amount also.

In all the asset classes Equities have given best returns with moderate risk and hence it is the most preferred investment destination in the world.

All in all we like to reiterate our stand

Stay Invested!!!!!

P.S.: We do not consider Insurance as an investment option.

Week Ending 5 February 2016

Dear Patrons, welcome to yet another edition of the weekly blog. We saw extreme volatility in the course of the week gone by, however we believe volatility will very much be a part of our markets in the foreseeable future. Increase in volatility in our markets is more due to global peers than local events.

Nifty started the week around 7600 and slid down to 7350 and regained most of the ground on the last two trading sessions closing at 7489. During the fall mid caps were the victims. Some of the mid cap stocks were brutalized in the last fall.

Nifty should find support around 7350 to act as base for some more up move. Barring a negative news on the global front, we should see a relatively stable market here on wards. This being the budget month the event risk remains in the market. We do not rule out a pre budget rally in our markets though. 

Last week both, the US Fed and the RBI held status quo in the interest rates. The Fed talk was pretty dovish and suggested no increase in interest rates in March. This resulted in the USD falling against other global currencies. The INR also gained some of the lost ground during the last two trading sessions. The RBI also held the rates constant. We have seen 125 beeps cut this fiscal and do not see any more cut in FY16. 

The results season is by and large over. There have been some extremely good results and some dampeners, however, we like to believe that the Indian economy is in very good shape and we should see improvement in the GDP in FY17. The GoI thrust on infrastructure spending augurs well for the industry as a whole along with Make In India campaign, which in all likelihood will result in India becoming a manufacturing hub, creating more jobs and expendable income, which in turn should push the growth rate higher. (Boeing is said to be in talks with GoI for their first manufacturing unit outside the US)

As seen above, should Nifty hold 7350, we are likely to see 7580-7700 levels in the near future. Many of the good quality stocks have been hammered out of shape in last one year. We strongly recommend to add good quality stocks to the portfolio in this period for long term.

Stay Invested. Happy Investing!

Week Ending 22 January 2016

Dear Patrons, first of all let me apologize for a long break in this blog due to some unavoidable circumstances. Coming back to our weekly analysis of the equity markets. The last week has seen a roller coaster ride in the markets, with the markets witnessing up and down movements throughout the week.

Nifty during the week saw high volatility and big moves both on the up as well as down side. During the week Nifty saw High of 7470 and low of 7241. The biggest reason for the fall can be attributed to the Chinese markets. Lack of stability in the Chinese Markets had a big impact on the world markets including emerging markets.

One more attribution for the fall can go to the currency reading. INR fail sharply against the USD, which prompted the FIIs to sell off Indian equity. The INR though behaved very well and held its ground as compared to other currencies. However, we would like to caution that the INR may post a new low in coming period.

Most of the world markets lost close to 3% in one single trading session, however, the tide turned positive after the ECB chief's announcement of further stimulus to the European Union economy. This positive news helped world markets gain some of the lost ground and almost all the markets closed with handsome gains.

We had clearly mentioned in our last blog that we see larger downside in the markets, when Nifty was trading around 7800. Current reading on Nifty is around 7400, which goes to show our conviction in technical analysis.

We still maintain our target of 6800 on the Nifty to arrive eventually. In such a scenario what do we do?

The mantra remains the same. "Accumulate" good quality stocks in every decline with a long term view. Our markets should look upwards in H2CY16. With a strategy to hold stocks for a long term one can start accumulating certain good quality stocks with every dip in the prices.

Happy Investing!!!!!