11th March: Creating liquidity by 75bps cut

The RBI cut the cash reserve ratio, the share of deposits banks must hold with the central bank, by 75 basis points to 4.75 percent,effective Saturday.The RBI's mid-quarter policy review is scheduled for Thursday, andmarket watchers had widely expected it to cut the CRR by 50 basis points then. The central bank is expected to begin cutting interest rates in coming months as both economic growth and inflation slow, but few in the market expect it to do so as soon as next week. The cut will inject about 480 billion rupees of liquidity into the banking system, which the RBI said had been on track for a worsening liquidity deficit in the second week of March, partly because of advance tax outflows

The Finance Minister will present the FY2012-13 budget in the backdrop of a sharp rise in the fiscal deficit for 2011-12. Interest rates have risen sharply in FY12 and budget provisions are expected to largely determine future monetary actions.

Budget expectation:
= The FM's priority in the 2012-13 budget will be fiscal rectitude

= The budget will aim to provide an investment – led supply push to growth as against a consumption.

= Expectation that the FM to target greater fiscal discipline. The target for fiscal deficit for FY12-13 is expected to be set at 5.02% on a nominal GDP growth of 13%. We expect increase in indirect tax rates (excise, service tax).

= Expectation of divestment target to be set at around the FY2011-12 levels of Rs.400bn.

= FM should invite more private participation by giving incentives for investments in targeted a

= On reforms, the FM may signal the Government's intention to move ahead with the reforms process on several fronts. DTC and GST are expected to be implemented WEF FY14 now.

= The budget may take some of them ahead - FDI in multi-brand retail, Companies Bill, Competition Bill, Mining Bill, Banking Regulation Act, Power sector reforms, etc.

= Changes in taxation of transactions in a globalized environment are also expected.

= Critical issues like labour reforms, pension reforms, etc may need broader political consensus.

= As far as tax measures are concerned, we expect the FM to roll back the stimulus provided earlier. Thus, I expect excise and service tax rates to increase by 200bps to 12%; a step towards GST.

I do not expect any major initiatives for the stock markets. Any reduction in STT will be cheered by the markets.

I believe that, the budget may have:
Positive implications for Banking, NBFCs, Capital Goods, Cement, Construction, Logistics, Media, Oil & Gas, Power, Shipping sectors; Negative implications for Automobile sector and Neutral for sectors like Aviation, FMCG, Hotels, Information Technology, Metals & Mining, Real Estate,Telecom.

Technical Analysis on Indian markets:
On Friday Nifty and Sensex closed with a biggest rally in 9 weeks. Sensex closed up with a gain of more than 2.% or 358 points supported by 23 stocks. Meanwhile, the NSE benchmark gained 113.10 points or 2.17% at 5,333.55.

Indian markets have closed negatively for the third consecutive week. Nifty closed down 25 points of 0.48% down on week on week basis. Nifty closed at 5333.55 for the week. Nifty which has scaled up to 5600 levels three week back have corrected and closed down to5333 levels. Nifty have always faced selling pressure at 5600 levels. Sensex lost 134 points or 0.76% to close at 17503 levels. Sensex made a high of 18500 levels lost nearly 1000 points in 3 weeks.

Moving ahead is the election week. Movements will be decided after the special day. Mean while Nifty will continue to find resistance at 5600 and support at 5200 levels in a broad range. On Wednesday Nifty tanked down below 5200 levels but closed at 5220 levels. Nifty had taken good support at its 200 DMA and bounced back. CRR cut news fired the rally and Nifty closed at 5333 levels. But still the 5200 levels will remain a solid support. Close below the same will take the nifty to 5050 levels. Moving past 5600 levels seems to be a bit difficult as of now. I still remain spectical that Nifty will close above 5600 levels.

50DMA is all set to cross over the 200 DMA, that will also trigger some buying spear. FII for the first time since the start of the year, were net sellers in the equity market on Wednesday. But the way they have bought on Friday, it seems that they are no mode to sell in the Indian markets. Any negative news in the budget can surely set the FII’s on fire, and they can come out to sell. Panic situation will be there in the market. It is advised not to trade in the market for a week. The mode will be set after the SPECIAL DAY.

26th Feb: GDP at 6.1%

Indian Q4 GDP growth slowed more than expected to the slowest in more than two years. The discontinuity of revised data means interpreting the outcomes remains difficult. However, annual GDP growth is now running below the trend pace as per the RBI's estimates. High frequency indicators suggest activity has probably turned at the start of the year, but GDP growth looks on course to hover around 6% for another quarter in Q1

2012 on base effects. The pressure thus remains on the RBI to ease policy to get growth back on trend. The recent spike in inter-bank liquidity deficit points to another CRR cut likely in the near term. However, the timing of this year’s Union Budget, coming just a day after the March policy review, suggests the first reduction in the repo rate may be delayed until April.

Rising crude oil hurting Indian economy in 3ways. Firstly, a 5% increase in domestic oil prices increased inflation directly by app 75 bps. Secondly, Oil accounts for 30% of total imports. A $10/bbl increase in oil prices will increase current account deficit by $8bn (0.4% of GDP), Third, Every $15/bbl increase in oil prices can lead to an increase in fiscal deficit by roughly 0.3% of GDP assuming a 10% increase in domestic oil prices.

Nifty is been in the downtrend since it closed below the 5400 levels. In the past also we have seen that the Nifty always faced severe selling pressure above the 5400 level. Nifty closed down at 5359 and Sensex at 17637 levels. As mentioned in the past the MACD is in the mood to give negative signal. RSI have been in the down trend. Nifty have taken support at its 14 DMA. Close below the same may take the nifty past 5300 levels. And it may further fall to 5250 levels.

FII started Month on the negative side. First of the month saw a small selling in the Equity market. FII sold stocks worth Rs127Cr. but the weekly close is still positive till the close of Thursday. DII remained sellers.

ONGC Online FPO saw a major jolt. The FPO saw a lackluster response. Bids for Rs.8000Cr were only done, in expectation of Rs.12000Cr which was projected. Finally local insurance had to come for the rescue. And the FPO was finally fully subscribed. The cut off time for the data was 3.30 pm but the data was not, hinting that the local insurance was asked to fill the FPO.

Commodities have done good this week. Gold got its shine back. Silver also closed above Rs.60000 per kg. Rupee is trading at 49.50 per dollar.

Dlf is in the negative trend. Independent Research house ‘Veritas Corp’ have come out with a report of a price target of Rs.100. Stock closed down at 203 levels. Close below the 200 levels can take the stock to 185 levels.

Sun 26th: It finally feels that we are over bought…

If you have read my last two articles that says “Are we not overbought????” & “Are we still not Over Bought???”. It clearly mentions that we are under pressure and no it could be difficult to climb higher as we did in the recent past. As the inflow have reached more the Rs.20K Cr in just 2 months, Indian markets have surged more than 20%. Nifty closed down almost near our first target of 5400.

International News

Greece ended months of uncertainty by finally securing a new bailout and debt-restructuring agreement with euro-zone finance ministers, but doubts remain over whether Greece will be able to meet the ambitious terms of the accord. The finance ministers agreed on the long-awaited €130 billion ($171.9 billion) deal after haggling into the early hours of Tuesday morning to settle the final details.

Dow Jones touched 13000 for the first time since May 2008 after Greece secured a bailout to avoid a March default. Signs of improvement in the economy and stabilization of Europe’s debt crisis have driven the Down more than 20% since last year, while the S&P has climbed more than 8% so far this year. Eurozone finance ministers have agreed on a $172bn rescue for Greece to avert an imminent chaotic default. Even with the bailout, Greece faces road to economic recovery. Greece Economy will not return to growth till 2014.

Crude news

The price of Brent crude has rallied strongly during the past month and this week, it reached the highest level since last August when the market was still coming to terms with the loss of Libyan oil. The rally has been driven by numerous geo-political events which collectively have increased the risk of supply disruptions from countries, such as Libya, Syria, Nigeria, Sudan and not least Iran, the world’s third-largest oil exporter.

FII inflows

FII continued to be positive but the phase have slowed down. FII bought stocks worth Rs.2300Cr and the total for this month has topped at Rs.14500Cr. Total FII inflow since start of Jan is almost Rs.24K Cr. DII have been sellers in the market since the start of the year. Total Sell amount surged to Rs.16K Cr. DII’s sold stocks worth Rs.3200Cr.

Back to Indian Markets
Nifty made a high of 5521 and a low of 5406 and finally settled down at 5429 levels. Nifty corrected exactly 200 points from its recent high of 5606 made in the last month. In my last article also I had mentioned that the long rally should come to halt, as in technical phrase, we are trading in a over bought zone, which made slightly difficult to have only upside movement. At the current levels also it is difficult to be in comfortable state. We still might see some further downside movements. In the Chart it is clearly seen that the 123.6% Fibonacci Retracement levels comes to 5604 levels and from there the Nifty had been falling to stop only at 5400 levels which is again its base levels. Further fall beyond 5400 levels can trigger fresh round of selling pressure. MACD in the last week had given a selling signal as we were trading in the over bought zone.

Are we still not Over Bought????

Giving some relief to government, inflation for January has come down to a two year low at 6.55% from 9.47% last year. This number was 7.47% in December. CRR cut is also on the verge.

Rating agency Moody’s warned that it may cut the triple-A ratings of France, Britain and Austria and it downgraded six other European nations including Italy, Spain and Portugal, citing growing risks from Europe’s debt crisis.

Sensex closed higher above 18000 levels but Nifty failed to close above the 5600 levels. Indices surged more than 3% in a week. Midcap were the flavors for the week. Midcap index gained more than 5%, Small Cap 3%. Realty sector closed higher by 1%, Power Index 3%. Auto index closed down just 0.5%. Bhel gained nearly 17% in a week. The stake sale news triggered the buying speer. Axis Bank gained 14%, Rel power gained 19% after the announcement of its results. SBI gained 11%, Rcom which have roped Standard Chartered and DBS for its under sea cable unit have falred the stock more than 10%. Idfc 10%.

The money have been drained out of the banks due to gaining cash payments during state elections, intervention to stabilize the rupee, and slowing loan repayments by companies, now calls for a cut in the Cash Reserve Ratio to boost the liquidity.

My last article read “Are We over bought????”, seems to be some what true. Nifty made a high of 5606, and acted as if its very hard to trade in the market. We had some correction also in the week, but the same old story was repeated. FII’s inflow helped to market surged ahead. Nifty made a high above 5600 but failed to close above the same. As mentioned in my article also about the importance of the Fibonaci retracement levels. We can clearly see in the chart, the last 4 trading session. On Tuesday Nifty managed to close above the 100% retracement levels from the high of 5380 and low of 4531 levels. On Wednesday opened with a gap and on the last trading session Nifty made a high exactly on the 123.6% retracement levels, and but found some selling pressure as it has a very strong resistance levels.

As discussed in my last article also that the MACD is on the verge of giving negative divergence, that may be seen in this week. RSI is trading higher and might turn negative anytime. As soon as there is negative divergence we might see Nifty falling down to 5400-5350 levels. Traders are requested to setback.

FII flow since start of this month have grown to Rs.21K Cr. DII have sold stocks worth Rs.13K Cr. Sensex rallied from 17000 to 18000 in just 12 trading session.

10th Feb 2012: Are we not overbought????

Economic growth could slip to 6.9% this year, the government said on Tuesday, the first time this year it has used a number less than 7% in its comments about the economy and eliciting reactions ranging from surprise to vindication to denial. The Central Statistics office, which puts out the official GDP numbers each year, said on Tuesday its advance estimates showed the economy on course to achieve a growth rate of 6.9% for the year to March 2012. which is sharply below 8.4% last year and if it happens, will be the first time in three years that growth could end below the 7% mark (in 2008-09, it grew 6.7%).

IIP Nos for the month of Dec 2011 showed an downward trajectory by growing at 1.8% YoY (street estimate of 2.6%) v/s 5.9% growth in November 2011 YoY.

In the past also we have seen that the Indian markets have been flourishing just because of the Foreign Institutional buyers. In the Month of Jan the FII have poured nearly Rs.9400 Cr in Indian Equity market. But in from the start of this month there has been an inflow of more than Rs.7900 Cr in just 7 days of trading (9thFeb). And now that’s called a ‘BIG MONEY’. The total of FII inflow from the start of the year is nearly Rs.17300 Cr nearly $3.3bn and that too without any fundamental change in Indian Economy. Since the start of the year FII were Net sellers on only 5 occasions. Numbers are doing the saying. IIP has been on the downtrend, high inflation, high interest rate, low sales in realty sector.

Indian Equity markets once again rallied above 5400 levels, but failed to close above the same. Failing to close above the 5400 levels, Nifty and Sensex fell on the last day of the week. In the week Nifty closed higher by 3% and Sensex closed by 1%. Midcap and Small Cap index closed higher 3%. Bank Index 3%, Oil & Gas 1%, IT 2.5%, Auto 2% & Power 1%. Stocks which took part in the rally were Sail which closed with a gain of 7%, Acc, Kotak, Tcs, Rel Power 5.5%, Wipro, Siemens 5%, Bajaj Auto 7.5%. Some of the midcap stocks which were on a tremendous buying speer were Jsw Holding which gained 61%, Thomas Cook after its stake sale news gained 39%, Ttk Prestige 38%, Sks Micro 36%, Ifci 27%, DB Reality 25%, Dena Bank 22%, Hdil 18%, Gammon Infra 16%, Jet Airways 16%. The stocks that closed in the negative zone were Sunpharma and M&m by 2.5%, Bharti Airtel 9%, Hul 3.5%, Dr Reddy, Idfc & Ranbaxy 3%.

Greek Political leaders have struck a deal on austerity measures, clearing the way for a swap to cut the nations debt and win its second rescue in two years. The accord came less than four hours before euro-region finance ministers were to hold an emergency meeting in Brussels to discuss a Euro 130bn ($172bn) lifeline to Greece and a debt swap that would impose a loss of nearly 70% on investors.

From the high of Mid Oct and from the low in Dec, Nifty have bounced back from that levels to complete the full circle. It has recovered hundred percent. Its marked in the chart with the Fibaonacci retracement levels. It’s clearly seen that how all the levels which are marked have retraced the Nifty from high. Its noticed in the last three days that there has been some selling pressure in the markets but at the end of the day, sudden buying by the FII’s lifted the market. Nifty is now in a overbought zone. MACD at any point of time can give negative divergence, that may lead to some correction. I am not sure about the impact on the markets when FII pull out money. But the amount which they have invested in the Indian markets in the recent past, may sure hurt investors when they pull put. Too much of everything is also not good. In the past 1 ½ month markets have rallied more than 20%. So investors should be cautious and play safe. Book profits on every rise.

05th Feb 2012: Back to 5200 levels….

Suddenly every one is turned positive and bullish on Indian Economy. Indian Equity markets have attracted huge sum of foreign flows. Foreign Investors have been investing in India since the start of the New Year. Almost Rs.13bn is already there in the Indian markets. But there are sellers too. Domestic Mutual Funds are selling on every rise. They have sold stocks worth Rs.7.2bn.

Indian Equity market have given one of the best return in the whole Asia pack, with returns of more than 13% since start of this year. Rupee has also bounced back from its all time low to close above 49 v/s dollar.

After a long gap Bulls got in good grip on the market and some how managed to close Nifty above 5200 levels. 5200 levels seem to be the levels of 200DMA also. And in the past also it has been observed that it has been a crucial point for the support and the resistance levels. In mid of Oct Nifty tried to close above the same but that did not happen some how and Nifty made a low near 4500 levels.

Last weeks article said (Nifty if stabilizes above 5200 then we could see higher levels also. Close above 5225 may take the Nifty to 5325-5400 levels) and Nifty close at 5325 levels what was mentioned. Nifty made a low of 5076 and high of 5335 and close above 5325.85. Sensex closed at 17605.

Nifty and Sensex gained nearly 2% in a week. Midcap and Small Cap rallied 3% each. Midcap were the flavours for the week. Some stocks gained more than 25% in week. STC closed up 44%, ITI 27%, Prestige Estate 21%, Hexaware & Orient Paper gained 20%. Aban offshore 23%.Oil index gained 1.5%, IT index rallied 3.3%. Power Index closed higher with a gain of 1.6%, Realty Index 4.5%, Auto 3.6% and Metals 3%. Acc, hindalco, Grasim, Jspl, ACL gained 6%, Sintex, Ivrcl and Shopers Stop 16%. Jet 15%, Akzo & Educomp 13%, DLF 9%, Sesa Goa 8%, Tata power 8%. Hero Moto corp 8%, hcl Tech 7%.

On the losers side Ptc 12%, Tata Coffee 7%, Coal India 4%, Bhel 4%, Rcom 2.5%, Cairn & LT 2%. FDC 6.5%. 3M India 6%, Escorts % Srei India 5.5%, onmobile 5.5% and Prestige 5%.

Nifty have close above the 200 DMA. In the last week Nifty had closed above its 50 and 100 DMA. And the RSI have started in the over bought zone. In the past article I had attached a chart with the trendline marked. Nifty have closed above the long term trendline and have made a bullish break out. The rally could continue till 5400 and should phase out for a while.

28th Jan 2012: Growth not the Inflation, new mantra for RBI

The European Union banned imports of oil from Iran on Monday and imposed a number of other economic sanctions, joining the United States in a new round of measures aimed at deflecting Tehran’s nuclear development programme. That might hurt Greece, Italy ad other ailing economies which depend heavily on Iranian crude and as a result, won as part of the EU agreement a grace period until July 1 before the embargo takes full effect.

The RBI on Tuesday slashed the Cash Reserve Ratio (CRR), the amount of deposits banks need to park with it, by half a percentage point to 5.5%, but kept other rates unchanged. Repo Rate @ 8.50% and Reverse Repo Rate @ 7.50%.

Indian markets surged 3% this week. Nifty once again managed to close above the 5200 levels and Sensex above 17000. Midcap and Small cap closed higher 3.3%. Bankex 4.3%, Metal Index 4%, IT up 4% and Auto 4%.

There is a long list of the gainers in the week. To name few, Sail, Tata Motors, Sesa goa, Rel Infra, Maruti all gained in the range of 10-15%. Bharti Airtel, Maruti, Idfc, Lnt, Mnm, Rcom, Rpower, Ril, Hero Motocorp, Ranbaxy all gained in the range of 5-10%. In the midcap stocks Ptc Financial closed with a weekly gain of 49%, Zensar Tech 27% & Indosolar 28%. The losers in the list are Midvalley Ent 30%, Kgn Intl 23% and Neha Intl 10%.

Volumes have been good in the markets with price appreciation. Markets have been trending up since a long time. Next weeks rally have been in continuation. Nifty and Sensex closed higher by 3%. Technically speaking Nifty has bounce back from its low to close near the trendline. (See in the chart No. 1.) the trendline is made on the basis of the highs which were made since Oct 2010. Nifty have closed just below the trendline. The Redline trendline (no.2) is made joining the lows which since June 2010. Nifty have closed below this also. RSI is in the over bought zone that calls for some caution in the market. MACD is still in the positive mode, but anytime the divergence can change. Nifty if stabilizes above 5200 then we could see higher levels also. Close above 5225 may take the Nifty to 5325-5400 levels, but the same will not be so easy as the Nifty is in the overbought position, so before the next rally we might see some correction.

Rupee too was in the hands of the bulls. After the intervention by the RBI, Rupee has bounced back to 49.30 levels. Commodities like Gold and Silver have also recovered some points.

FII continued with its buying speer. And DII on the other hand continued to be buyer in the Indian equity market.

07th Jan 2012:

Euro tumbles against dollar to 16 month low and nearly 11yr low against Yen hurting Japanese export oriented stocks. Crisis in Euro spreads over smaller countries after Hungary 10 yr bond reaches 10% earlier European markets ended lower lead by Banks after investors were skeptical of Euro Italian 10 yr bond move above 7 % Banks ability to raise capital.

France sold 7.66 bln Euro worth long term debt in the markets average yield of 3.99 % reflecting concerns of France may loose triple A rating.

Asian Markets are cautious ahead of the U.S. Crucial employment report.

Back home trading volumes continue to be low despite Nifty trading above 4700 levels.

Nifty closed at 4754 and Sensex at 15868. Indian markets rallied more that 2.5%. Midcap and small Cap indices gained 2.2% & 3% respectively. Tata Motors closed higher by 14%, Ril Infra 11%, Icici Bank 10%, Lnt & Tata Steel 9%, Ranbaxy & Cairn 8%. Hero Honda lost 9%, Dlf 4%, Bajaj Auto 4.5%, Acc and Ntpc closed down by 3% & 2%.

Technically speaking Nifty have bounced back from its recent low of 4531 to make a high of 4795 in the week. If we look at the Fibonacci Theory from the high of 5399.7 to the low of 4531 levels. Nifty closed slightly above its 23.6% retracement levels. In the week Nifty made higher top and higher bottom pattern, But still the pattern is not complete. If Nifty closes above 4800 levels, then we might see higher levels till 4850-4863- 4900 levels. If the trendline is broken (Marked in Red) then we might see some higher tops.

31st Dec: India the worst

Number says everything. Indian is the worst performing index in the Asia pack. Nifty and Sensex had slipped down 25% in the year 2011. Where is Indian markets heading towards? India with all the negative news are not going to go higher. Inflation still a problem. Political issues are the main cause for the Indian downtrend. Reality was amongst the worst returning assets this year.

Over all the 2011 have really bad. Rupee slipped to its all time low. Indian Rupee has turned out to be one of the worst performers among the major currencies vs the Dollar. FII flow has dropped to its low. Even after increasing the trading time in India, volumes have not increased but infact the volumes have decreased. There is a long list of the scams that have unearthed in this year.

Indian markets collapsed nearly 25% this year, counting as the worst performing Index in whole Asia. Reality Index collapsed more the 50%,Metals 47%, Bankex 33%, IT Index 18%, Small Cap 43%, Auto 20% & Oil and Gas index closed down 30%. This year was not only bad for the Equity market but the commodities markets also made many losers. The only commodity which gained is gold which closed higher by 11%. Silver after its absurd rally corrected 10%, Copper 21%, Cotton 36%, Sugar 22%, Wheat 20%, Zinc 25%, Tin 30%

There are end numbers of companies which have lost more the 75% of their market capitalization. Stocks like Gtl, Adsl, Jai Balaji, Arss, Ksoil, Sks Micro, Lanco Infra, Triveni Eng, Spice Jet, UB Holding, Infotech lost in the range of 80-90% of the market capitalization.

Companies which lost in the range of 60-80% are ICSA, Gtl Infra, Jet, BGR Energy, Moser bear, Dishman Pharma, NCC, First source, Bajaj Hind, DB Reality, Guj Nre & Essar Oil. Ril Infra, Ril Power, Ril Com after all the bad news has fallen down 55% each.

Sail, Hindalco, Sesa Goa, Tata Steel, JP Ass, Lnt, Bhel, Idfc, Icici bank, Axis bank, United Spirit lost in the range of 40-60%.

Pnb Bank, Tata motor, Maruti, DLF, Ntpc, Jspl, Tata Power, Bpcl, Ril, Ongc Wipro, Gail, Jubilant Foodworks, Godfrey Philip, Marico & Supreme Ind sinked from the range of 20-40%.

Nifty closed down at 4624 levels which is well below the 4750 mark. In my last few articles also I had mentioned that the Indian markets are not going to rally. We may see 4400 levels also in the coming weeks as the scenario in the Indian markets are going bad to worst. In the chart we can clearly see that the Nifty made the same pattern before also and had triggered more selling in the market and fallen down till 4640 levels. Recovery is still far. We may see levels near 4000 levels also.