Dec 15, 2013

Market Update 15/12/2013

The euphoria over the state-election results proved to be short-lived. The index ended lower for the last 4 trading sessions of last week. The Sensex closed 1.3% lower from the previous week.

Subdued growth numbers (IIP and Exports) and higher than expected inflation no's (CPI- 11.2%) dampened the market mood. There was also uncertainty over tapering in the US which decreased investor risk- appetite.

Technically we are close to the Bollinger center band and also the 50 DMA. A small bounce back is thus on the cards. But, a break beyond both these supports would mean that the market will move lower in the short term. The RSI and the MACD have moved in to the neutral territory with slight bearish over-tones.

The RBI policy review is expected on Wednesday. Markets will trade in a narrow range till then. The 10 year G-Sec currently trades at 8.91%, almost unchanged from the previous week. It is difficult to predict how the RBI will react as inflation continues to remain stubbornly high and at the same time economic growth continues to remain weak.

There is also a Federal Reserve meeting this week that will need to be tracked closely. US Treasury yields have moved  up slightly. This indicates that the debt markets are gearing up for an announcement around "tapering".

Crude Oil moved lower in the week on account of global macro-uncertainty. WTI closed the week at $96.6, while Brent closed at close to $108/ barrel.

The USD moved up sharply against the INR. The INR touched its resistance of 61 before giving up its gains to end at 62.15 to the dollar. Technical indicators suggest that the Rupee is over-sold and there should be a small bounce back.

Gold moved up slightly before ending the week at $1238/oz. Domestic prices will depend on the Rupee movement.

Dec 8, 2013

Market Update - 8/12/2013

The markets closed the week 1% higher than last week. Exit-poll results were perceived to be the main market drivers on Thursday and Friday. The verdict is out and along expected lines. A small bull rally is therefore in the offering. The Sensex is just shy of the all important 21,000 mark.

The market is well above its 50, 100 and 200 day averages. Bollinger bands seem to suggest that we've reached the "upper-end" of the short-term rally. It will be interesting to see if the market 'listens" to technicals or ignores the same on account of the exit polls. A small rally can be expected- but investors will be quick to book profits. The short term support is 20,550.

The MACD and the RSI are still in neutral territory. This suggests that the over-all bull rally that began in end August is still intact and will hold for the near-medium term.

On to fundamentals, GDP growth and the CAD have improved. Dec corporate earning reports are expected and will be closely monitored. Expectations are that earnings will continue to remain 'subdued'. This could take some steam out of the rally. Fed tapering talks continue to swing the market both ways and there is still no clarity yet on 'when' actual tapering will begin. The US dollar has weakened but the yield on the 30 year G-Sec has gone above. This is a clear indication that the bond markets in the US are getting ready for tapering 'soon'.

If tapering happens then the emerging markets will correct as FIIs have been the biggest buyers and the main reason for the bull rally. We might not see a sell-off, but there will be a correction and a good opportunity for long term investors 'to buy'.

An interesting development that has been reported recently is the 'retail interest' in the US markets. These are the classic 'early bull-market' signs. Retail participation in the markets has been positive this year, for the first time since 2008. However, the US economy is still recovering and a rally might be premature.

The 10 year Indian Govt G-Sec has moved up to 8.86%. Tapering expectations and high brent crude prices may have moved up yields. The RBI's policy review will need to be closely watched. Tapering fears could move yields higher.

The INR broke its resistance of 62 and went up to 61.18 before settling the week at 61.43 to the US dollar. With this move the trading range for the Rupee may have moved from 62-63.5 to 61-63. Tapering fears will weaken the Rupee. Bollinger bands and the RSI suggest a moderate bounce back by the dollar in the short term.

Gold is currently close to $1230/oz in the international markets. This is close to it's 52 week low. Technically gold continues to remain weak. In the event of a Fed taper gold will only continue to move down. In the domestic market gold is at Rs 2,770/gram. Movement is expected to be inverse to the INR.

WTI crude closed the week at $97 while brent has crossed the important mark of 110 and closed last week at $111.61. This will not be good for the CAD.  


Dec 1, 2013

Market Update 1/12/2013

The markets have had a positive week with both the Sensex and the Nifty closing 2.8% and 3% higher than the last week respectively. GDP growth at 4.8% came in better than the last quarter. A few international factors were also at play with the Fed indicating that tapering would not happen any time soon and also the Chinese announcing a slew of reform measures aimed at strengthening their economy.

The positive uptrend may continue over the short-term. Fundamentally, markets (Sensex & Nifty) are close to average valuations. As a long term investor this might not be the time to jump all in to equity.

While most analysts are predicting new all-time highs for the Nifty and the Sensex in the short to