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.