RBI policy, market up for 4th day

RBI policy kept rates unchanged, market was a little jittery with expectations that, there can be negative surprise. As nothing changed, interest rates kept at 5.15. It was joy for the markets which moved up for the 4th straight day after the budget day fall.

After a steep drop, getting to big rally is creating confusion in the minds of traders.

 

 

 

 

 

 

 

 

 

 

 

Nifty Daily chart

When there is a big drop and steep recovery, it brings confusion. Histogram on the chart has a deep bottom & now price has moved above the EMA. Price says market is bullish, indicator says there is strength on the bear side. And the chart is trending bearish (red lines on the top – indicate bearish trend)

This confusion should lead the markets to go nowhere. For few days it will hover around the range, find resistance at 12292 levels reached on 24th Jan. From here, going long will be a trade that has very less steam left in it. For a short we need price to close below the EMA, which again will be a trade that is half way through.

So, no trades for few days in Nifty. Even Bank Nifty is the same. If both indices are in confused state, in a market that is having strong bullish strength, where can a trade come through.

In a market that has made a good rally, best trades can come from the shorts. One can find stocks that are showing weakness at the top and short them.

Reliance, Hindalco & VEDL have potential shorts – 

 

 

 

 

 

 

 

 

 

 

 

All three charts having similar pattern. Price is in the zone between 2 EMA’s. Histogram has good depth & chart is trending bearish. Also all 3 have reached value zone( area between both EMA) in 3 to 4 days from their bottom.

Within 5 day’s from the peak or bottom is considered to be hot and more likely to reach back to the bottom.

These are for intra day trades.

Coming to trades for the next day, that is Friday 07-02-2020.

Balakrishna Ind – Stock is getting weak at the top, can have a short trade once the daily histogram ticks down. There was a false break out yesterday, which also adds to bearish strength.

Havells, is getting closer to its weekly value zone. A tick down on the daily will give a short signal. Target can be at 576.

Mindtree had a high rejected & ready for short below 898.

 

Wacia Talk

The discussion will revolve around the following questions. There may be more questions based on the responses of the panellists.

In your opinion, is the downturn real or an exaggerated media hype?
It is a regular cycle like a business cycle. It happens once every 10 years, only that we have forgotten the previous occurrence because of the recency bias that humans have.

Take for example you doing a walk, at your regular pace you are able to complete 1 km in 20 mins. After the walk you don’t feel tired and your routine continues.

Say that, there is some urgency and you have to run to reach your destination, You run and cover 1 km in 15 mins. You get a little tired after a little panting, your routine resumes.

Now, if you have an emergency and you run even fast. You make the same 1 km in 10 mins. Just because you managed to do the same distance in 50% lesser time, can you make it as your benchmark?
Will it be possible to continue at the same pace?

Compared to the small running, now your panting will be more and you have to take rest even before you take the next step. Need some water to get refreshed. While that does not mean you are done for your life time.

It is the same that is happening in the economy. We generally grow at 6%, moved up to 7%, there was momentum, we stretched to 8. Now we are cooling off bringing in changes that can take us to next such journey.

Media is a store keeper of news, they cannot keep giving good news, it will be boring and people won’t be there to listen. They have to make people fearful, they will use all the available options to do that.


If the slowdown is not real, what explains the disconcerting trends in the macroeconomic indicators?

Let’s look at the numbers, is it really worrying. Our average GDP growth in the last 30 years. That is since, 1991, the year when India began thinking of liberalisation. We open to global economy in 1995.

The average was 6.32% growth
Highest was 8.84 in 1999
Lowest was 1.05 in 1991
Last time we went below 5% was in 2008 – 3.08%. Before that, from 2000-02 3.80 to 4.82, now it is at 4.50%.
1999 – 8.84, 2010 – 8.49 & 2016 – 8.17

Range for our GDP is 2.55 to 10.47 using the current history and its standard deviation. As of now we are within the range. Not to worry.

Some industry numbers that are shaken –
Auto industry has taken a big hit, there are various reasons for that.
Ola – Uber reduced the need to own a car.
Car rentals made even people who do long distance travels by car, not have a need to buy a car.
EV, made those who had thoughts of changing their cars are even new buyers wait to have the experience of new vehicle.

Beyond all, there is no innovation. If you notice the car industry. Innova launched in 2004. Swift launched in 2005. Indica launched in 1998. After that only small tinkering of design
Today SUV’s are hot, because there is a design change. At least some people like it.


If the ‘slowdown’ is real, how early were you able to sense it’s oncoming? What did you do to fortify yourself? In hindsight, did the advance actions really protect you or reduce the damage?

We sensed it in the first quarter of FY 2018-19. When businesses begin to slow down on their growth. We have an automated system which takes care of both upside and down side.

We do stock and mutual Funds investing. The system is automated, when growth slows down, exposure to stocks get reduced. We get into cash.

In mutual fund investments, When economy turns down and prices drop it is a big advantage because it will help investors accumulate units at lower levels. When markets are only going to go up in the long run. Downside moves are boons to those investors.

If you had been investing in sip’s. All the units that you acquired in the last 2 years are the one’s that will give you very big gains 2 years from now.

Has the forecasting helped us? Yes, our portfolios had 50% exposure when the challenge was high. Now it has moved up close to 90%.


How long further do you think this phase will last? What are some of your major strategies to stay afloat and grow through this phase?

When there is big growth and high inflation, it is sign of a top. Now we are having the opposite. Both GDP & Inflation are down. This is the early sign that we are getting close to the bottom.

It is likely to continue for another 2 to 3 quarters. Growth will come back at a slower pace next year, because of the base effect of current years bottom, it will show as big growth and the same recency bias will make people get euphoric.


What specifically should the governments do to help you ride over the crises?

When both GDP & inflation are down, government begins to hear the industry and people’s voices.

The out come of that was the rationalization of GST, reducing corporate taxes. This tax reduction is a very big move. It will have a 33% compounding in industrial growth. You can imagine where India will be in10 years with this phenomenal growth.

If we are not turning up in the next 2 quarters, Personal taxes will be touched upon. It will get reduced. Government will put more money in people’s hands & urge them to spend.

People are not spending now, that is a different issue.

It is not that people don’t have money. In the recent 2 IPO’s, IRCTC & CSB. Issue size was 1080 crores. How much came in? 1.00 lakh crores, There is money in the system, it is not getting spent.
How many of you have bought a new car in the last 1 year?


What can industry and business associations such as WACIA do to help in a speedier recovery?

Innovation – today we have start ups disrupting almost every part of the business process. While there is no new experience that these start ups are creating. They are only destroying the life of lower level workforce.

Discount culture is ruining all the businesses. Jio has disrupted the telecom space, how many of us realise the impact of monopoly in this space and that too with Reliance. The other 2 players, go bankrupt, 2 lakh crores of banks loan book will go to default. One man’s greed has to be funded with tax payers money.

Unless people get a new experience, they will not splurge in spending. So, there is a strong need to bring new experience to the consumers.

Industry associations can work towards bringing awareness about this thought organise events to bring creativity and knowledge together which will help bring new user experiences, which will automatically propel growth.


What is your advice to other industries and business for braving the challenges ahead?

It is not the first time we have taken rest after a big growth, the next occurrence will be even strong as we expect the next upside to be very steep. Once we move past the 8% mark which can happen in 2012 or 2022, get ready for the next softening.

Continuous innovation to give new experience to consumers is the buzz word.

Apple brought a dramatic change in phones, Google is creating what you would not have even thought is required and in few years, without which we are not able to live. Such kind of innovation should be a continuous process.

Trades This week – 18 Nov 2019

Broad market is getting tight to reach higher levels. Chances are that, there might be a new high on the Nifty, while after that we should see a considerable correction.

In this correction there will be some good trending stocks coming to value zone and give long trade possibilities. Some of them in that list are Bata India, BPCL, Container Corp, Dabur, Hindustan Lever, Petronet & Siemens.

BEL had a long trade on Friday last, position has not done much, 20th November will be 5th day into the position, which is one of the exit rules. Tomorrow at market close, this position will exit.

In all the other expected trades, when there is an uptick on the daily charts we will have a trade. Will have the trades posted as they come through.

Chart of BEL Trade

Trades This Week

Analysis to find trading opportunities in the coming week. We will be using technical analysis through the triple screen trading system to find trades in the coming week.

This effort will be a continuous activity with weekly updates. As I do analysis for my trades, I thought sharing it will help a few other aspiring traders as well bring a commitment in me to do the activity with discipline, which will enhance my trading skills.

Let’s begin with the broad market view. How is SENSEX & NIFTY?

Both SENSEX & NIFTY have scaled past their historic peak levels. SENSEX moved to a new high while NIFTY fell short a shade lower after crossing 12K. The current uptrend in price of both the indices have gained strength, where indicators are showing signs of further continuation of upward price move.

This said, it will not have a straight upside. In making it to the current levels 40K & 12K, both the indices have got tired and began their correction before getting to the next rally. Now, here is an opportunity for going long on Nifty.

Rating downgrade by Moody’s should take the indices down. Nifty can reach 11700 levels before making the next upside attempt.

How the industry groups are positioned?

Of the total 115 industry groups 65 are Bullish and 50 are bearish, so we can see a clear shift of the market to bullish direction. The concern here is that, out of 65 bullish industries, 47 are yet to show strength. And out of 50 bearish industries 38 are strong on the downside.

Now we get another confirmation for the correction that has began in the markets from 8th November. Bears are still showing some strength, after the correction that is going on now, some of the 38 will move up to the bulls side. By that time from the 47 bullish industries that are not strong yet will gain strength.

Now it is time for some shorts.

On the weekly charts the following stocks have a potential for short trades. Canara Bank, Lic Housing Finance, Piramal Enterprises & Cipla.

When market goes down and ticks up, there are potential for long trades in Container Corp, Divis Labs, BEL, HPCL & Mahanagar Gas

64 lakhs turns 1 Crore in 120 days

BravisaTempletree added HDFC AMC to our portfolio of India Top 30 stocks in June 2019, today this investment just crossed 1 Crore mark. In 120 days 64 lakhs goes on to become 1 crore. The gains made in this position gives me the first signs that our market has revived from its bear hug. Feels like the return of good old bull market days of 2014-17. Brings confidence that, the next leg of top performance against all other investment portfolios like we had done in 2017 has begun.

As HDFC AMC leads the pack of gains this season, we are having stocks like Bajaj Finance, Bata, SBI Life, Avaas Financier, KEI kind of stocks supporting with good gains building up in their positions. Both SENSEX and NIFTY are reaching for their all time high levels, now the tide is changing. In the last 2 years a handful of stocks were leading the markets upwards bringing confusion in the minds of investors as to why their investments have not gone up, where as the market is going up.

Now, it is time for the SENSEX and NIFTY to cool off while the broad markets will take a lead. Already in the couple of past sessions we have seen big traction in price moves of Mid & Small cap universe. Even today as I write this small note, NIFTY and SENSEX are down, while both Mid and Small caps are up. Infosys, which was the Gold Standard of India’s corporate world got mired into problems, today a whistle blower letter indication discrepancies in their accounts has tanked the stock 13%.

Showing that one day like how a bad market can revive to good times, some good also can go down. Being in the market, we should not worry about all these issues. If we have a process and follow it with discipline, we will not be caught in any of these challenges.

In our experience, we have not had any of the bad names of the resent season in our portfolios. DHFL was there with us 3 years back. At that time company was growing we made our share and got out with 100 plus percent gains. INFY, was out of our radar in 2013. Same stories for many stocks that have lost more than 50 to 90% in the recent meltdown in our markets.

Market Going Down, What to DO?

Market giving back gains post Corporate tax cut announcement, while the decisive change of direction post the announcement will hold the markets in a range. That should take about 2-3 quarters from now for a Bull Rally to resume. Markets are waiting for profit growth to show up in the balance sheets before buying power comes in.

Good time for SIP Investors as it does its job only when markets are down. One time investors can use STP route to get in and be ready for the next big bull market for India.

Thought sharing with Duvvuri Subba Rao

Had the opportunity to share a few thoughts about the present condition of the economy and taking views of our former RBI Governor Duvvuri Subba Rao on the NBFC crisis that has been haunting the markets today.

In the days when Subba Rao was the governor, most of the decisions RBI took were hitting the markets badly. A 1% drop in interest rates, which was history, where India had not seen such a move & towards the later part of his tenure a 0.75% increase in rates. When this was announced market tanked & even for me it was enough of this governor. Such was the mood.

After he took over as governor, it was on 5thSeptember 2008, on 7thSeptember Fannie Mae and Freddie Mac got taken over by the government. 8thSeptember, Countrywide goes down. Then one by one Bank of America, Meryl Lynch to finally Lehman Brothers on 15thof September.

It was as though he comes in with all the bad omen. After a few months in a meeting some one asks him, ‘when will the financial crisis end’. His answer was, ’if you think I caused the crisis, the day I step down as the RBI Governor, it will end. It so happened that, Raghuram Rajan took over from Subba Rao on 3rdSeptember 2013 and the world turned around on 5thSeptember.

On hindsight the story is trilling, when we went through the days in reality it was a real challenge. For a person having gone through those challenging periods, I have many a times cursed the governor for his decisions. Especially in 2012 and 13, markets were showing resistance to every news, upon that bad news was like fuel to the fire.

Central banks world over cannot express what they think, he said that, every announcements will get rehearsed for more than 2 hours juggling words before reporting and yet the media will catch something at fault.

The last time when the 0.75% interest hike was done, next morning is a press meet and he gives out genuine concerns, thinking that market will welcome the thoughts. With in 90 minutes market tanks 300 points, which was 1.5% on the index. After the meet his colleagues tell him that, what you said is all true, while all that should not be told.

On the NBFC crisis, if Govt or the RBI would come to the rescue of the NBFC’s to help them come out of the mess. He was very clear that, RBI will not do anything. If suppose it intervenes, you people will go and invest more into those stocks and believe that all the problems will get taken care off by the RBI. Let a few of them get extinct, they made a mistake and are into trouble, why should someone come to bailout. We like the western world and appreciate their moves, while we don’t want any troubles that they went through. In the US there are many banks which have failed, whereas in India we have not had even one. By protecting, we cannot grow. Some of them going out of business will not bring big damage to the country.”

It was wise words, at present our country is going through a very big corporate cleanup. It will find some big names going down, we should get prepared for it. After the pain, we will be a more transparent economy and attract very big growth.

High – Low Index Trend Analysis Statistics

Markets Index are going down, when is it likely to change course? There are some indicators which give investors early signs of the prevailing trend coming to an end. A couple of such indicators like New high New Lows (NH-NL) & Index Trend direction (TD) have some very useful information.

The NH-NL index is the index of leading stocks in the direction of the market in 3 time periods. When a market is down, how many stocks are leading the downside and when it is up how many are leading on the upside. Market tops happen when upside does not match with the price move in the market. Like when the market hits a new high and the NH-NL indicator is not, it is a sign that market is getting tired.

On the down side, the NHNL indicator gives signals for a sharp reversal. The 30 day NH-NL, when it hits -1000, it is time to buy the strongest stocks in the market, the turn around will be very sharp. On the 90 day NH-NL, the indicator should hit -500 and on the 365 days or 52 week NH-NL as it is popularly called should hit -400

NH-NL of each time period can be used for different periods of buy & hold time frames. A signal on the 30 day index will be valid to hold the position for about a week or 2. 90 day signal is valid for a month long holding & the signal on 52 week will hold direction for about a quarter of an year.

NH-NL signals on the buy side are very powerful, price moves will be sharp.

One such opportunity is coming up now. 30 Day NH_NL is about to cross -1000. 90 day is already past -500 & 52 week is close to -400. What all of these are indicating is that, a turn around in the market is around the corner.

It is time to identify stocks that are stronger than the market, whole stock prices have had a significant correction after a good rally. Such stocks are the ones which will be the leaders when the market turns direction.

The Trend Direction (TD) Indicator, shows the number of stocks that are trending bullish, bearish & sideways. Ideally when there are more number of bullish trending stocks, market is euphoric. Also when there are a large number of bearish trending stocks, the reversal will be sharp.

This index is worked on the NSE 500 stocks. Weights are given for bullish, bearish and sideways directions. When the indicator hits -500 or more it is time for a reversal. Now the indicator value is at -345. In just about few days if the correction continues, we will hit the bottom.

Both NH-NL and TD are showing strong reversal signs, it is time to get prepared for identifying stocks that will have big rally.

Our first woman FM, Nirmala Sitaraman

Amid wide expectations that Amit Shah is to be announced the Finance Minister (FM) in the current term, we get a Surprise. Amit Shah, who was a stock broker, was assumed to be a big positive for the markets as his decisions will trigger lots of good moves.

Some were having aggressive expectations, while some had the confidence that, he will not be aggressive while will bring big future to the Indian economy which will trigger some big moves in the market.

While the announcement came that, Nirmala was the next FM, markets tanked. She is an aggressive person. Where market had jitters that, her short temper will not be good for both the country and the markets. Stocks tanked as soon as the announcement came.

There was an experience recently, where she was addressing a group of students at JNU. Some questions triggered heated arguments and her decision to ask the student not to ask any more questions changed the atmosphere instantly at the college.

Such instant change of mood is not good for the markets either. While soon the market realised that, it was a welcome move and stocks took to new high’s again. Many were of the opinion that the PMO needs a joker in the front & they form the rules. I am at total disagreement to this thought.

PM would not like to interfere in the decisions of big responsibilities like the Finance Minister. Yet he would like to influence his opinions in many places. Being the first woman FM of our country and Amit Shah given Home ministry, whatsapp groups started circulating that,

‘for once a man takes care of Home and woman takes care of Finances’.

Just recently I happened to read in a book by Paulo Coelho that, in the beginning of mankind it was women who were making big decisions with the power to execute them. Soon male supremacy took over and woman went submissive, while all these changes only brought more discontent like corruption, greed and selfishness.

As a country, in the space where we are now, we need bold decisions to be made and stick to them amid controversies. This, our new Finance Minister is the right person, to decide and handle. For sure we will have a lot of discontent in the current term, as many of the decisions will affect the large part of current population, which is only demanding and not contributing.

We are likely to witness some great fireworks from the finance ministry, which the already compliant population can sit and enjoy the colours unfolding themselves.