Introspection
The past week has not been good for the Indian equity markets. First, the lukewarm interim budget and then the renewed concerns of recession in US pulled down the Indian bourses. Both Nifty and Sensex ended the week, down approximately 7%.
Now, how's the road ahead looking like… With elections coming by, the government may not take any major policy decisions, and hence we might not see any support coming from the diplomatic front. There are certain reports in the media regarding yet another fuel price cut, but it might not help the companies much as the prices have already reduced substantially from higher levels.
At the financial front, Reserve Bank of India (RBI) is expected to cut the benchmark rates by another 50 bps to 100 bps, as inflation is already down to less than 4%. RBI may also force the banks to reduce the lending rates which will further ease the pressure from the companies and may stimulate the consumption cycle.
Globally, things are bad, which we all have understood and know by now. It took us more than an year to accept this fact. Now, further negative news may only trigger immediate downside, but it seems limited now. Dow is already sitting at six year low. It may go another 500 points, but fear of further downside is a more of a pessimistic view.
The ailing financial institutions have already go bankrupt and the government in US will not allow further destruction at the economic front. It is now actively putting in the money in the companies, buying stakes in troubled companies and ensuring that conditions do not deteriorate much.
Hence, this is my personal view that we are now in second phase of bear market where we may see "consolidation" happening for sometime. After about 13 months of destruction, we may see another 6 months of consolidation where we may see some negative news flowing in form of recession / bankruptcies or some positive announcements coming from the governments and central banks to stimulate the economy. The stock markets too may follow these events and can remain range-bound.
Amidst such scenario, an investor must learn to be patient and remain invested for at least one year. The traders should trade with strict stop-losses and must book profits at regular intervals.
Sectors to look out for in long term…
In this year of stimulation, the focus will be on Infrastructure and related sectors. The government would be spending money to prop up the infrastructure and invite the global players to invest in Indian economy. In the just concluded Bull cycle, the foreign players often complained of poor infrastructure in the country. The government will surely have a look at this weakness and improve the same as well. Hence, one may see some buying coming in Infrastructure stocks like GMR Infra, Reliance Infrastructure, JP Associates, etc.
Also the related sectors like Infrastructure Finance, Cement, Steel, etc may also benefit from the same. Hence, one can also invest in stocks like IDFC, IFCI, Ambuja Cements, ACC, Tata Steel, etc.
Another sector which is to look out for is Energy and Power sectors, which has now become a priority for every government. Stocks like NTPC, Power Grid, and Reliance Power can also be bought with long term perspective.
The week ahead…
The coming week could again be a white-wash for the Indian stock markets, if provisional data is to go by. Derivative figures on Friday indicate a huge build up on sell-side by FIIs. There have been increase of Open Positions of more than 80000 in Index Futures side and net sell of more than 900 crores, which indicate that FIIs are anticipating further downside in the Indian stock markets.
The level of 2700 is crucial for Nifty. If Nifty closes below this level and remain there for 2-3 days, then we may see bear cycle coming in Indian markets with maximum upside of 2800 and downside of at least October lows of 2300. The chances of market bouncing back from these levels are also high.
Hence, one can safely adopt a strategy for buying 2600 Put and 2800 Call for March. The maximum risk according to Friday's closing will be around 8000 Rs. per lot-pair, whilst maximum gains are unlimited.
On the stocks side, stocks from Infra, Pharmaceuticals, and Cement looks strong. One can buy these sectors in the coming week.
Wishing you a great week ahead!!!!
The past week has not been good for the Indian equity markets. First, the lukewarm interim budget and then the renewed concerns of recession in US pulled down the Indian bourses. Both Nifty and Sensex ended the week, down approximately 7%.
Now, how's the road ahead looking like… With elections coming by, the government may not take any major policy decisions, and hence we might not see any support coming from the diplomatic front. There are certain reports in the media regarding yet another fuel price cut, but it might not help the companies much as the prices have already reduced substantially from higher levels.
At the financial front, Reserve Bank of India (RBI) is expected to cut the benchmark rates by another 50 bps to 100 bps, as inflation is already down to less than 4%. RBI may also force the banks to reduce the lending rates which will further ease the pressure from the companies and may stimulate the consumption cycle.
Globally, things are bad, which we all have understood and know by now. It took us more than an year to accept this fact. Now, further negative news may only trigger immediate downside, but it seems limited now. Dow is already sitting at six year low. It may go another 500 points, but fear of further downside is a more of a pessimistic view.
The ailing financial institutions have already go bankrupt and the government in US will not allow further destruction at the economic front. It is now actively putting in the money in the companies, buying stakes in troubled companies and ensuring that conditions do not deteriorate much.
Hence, this is my personal view that we are now in second phase of bear market where we may see "consolidation" happening for sometime. After about 13 months of destruction, we may see another 6 months of consolidation where we may see some negative news flowing in form of recession / bankruptcies or some positive announcements coming from the governments and central banks to stimulate the economy. The stock markets too may follow these events and can remain range-bound.
Amidst such scenario, an investor must learn to be patient and remain invested for at least one year. The traders should trade with strict stop-losses and must book profits at regular intervals.
Sectors to look out for in long term…
In this year of stimulation, the focus will be on Infrastructure and related sectors. The government would be spending money to prop up the infrastructure and invite the global players to invest in Indian economy. In the just concluded Bull cycle, the foreign players often complained of poor infrastructure in the country. The government will surely have a look at this weakness and improve the same as well. Hence, one may see some buying coming in Infrastructure stocks like GMR Infra, Reliance Infrastructure, JP Associates, etc.
Also the related sectors like Infrastructure Finance, Cement, Steel, etc may also benefit from the same. Hence, one can also invest in stocks like IDFC, IFCI, Ambuja Cements, ACC, Tata Steel, etc.
Another sector which is to look out for is Energy and Power sectors, which has now become a priority for every government. Stocks like NTPC, Power Grid, and Reliance Power can also be bought with long term perspective.
The week ahead…
The coming week could again be a white-wash for the Indian stock markets, if provisional data is to go by. Derivative figures on Friday indicate a huge build up on sell-side by FIIs. There have been increase of Open Positions of more than 80000 in Index Futures side and net sell of more than 900 crores, which indicate that FIIs are anticipating further downside in the Indian stock markets.
The level of 2700 is crucial for Nifty. If Nifty closes below this level and remain there for 2-3 days, then we may see bear cycle coming in Indian markets with maximum upside of 2800 and downside of at least October lows of 2300. The chances of market bouncing back from these levels are also high.
Hence, one can safely adopt a strategy for buying 2600 Put and 2800 Call for March. The maximum risk according to Friday's closing will be around 8000 Rs. per lot-pair, whilst maximum gains are unlimited.
On the stocks side, stocks from Infra, Pharmaceuticals, and Cement looks strong. One can buy these sectors in the coming week.
Wishing you a great week ahead!!!!
