Is this a new bull market or just a bounce back??

On 24^th March 2020 Prime minister of India announced the first locked down in the country. On the same day Nifty made a short term bottom around 7511. Stock market is a derivative product of the economy. When economy is booming, stock market gives abnormal profits and vice versa. Then why stock markets are going up in the locked down phase?? Ideally it should go down…

That’s because of liquidity pumped in by central banks in the economy. All central banks in the world have reduced interest rates sharply and purchased bonds from open markets. RBI announced moratorium till august 2020 so that borrowers will not have to worry about their EMIs. Now all banks can book the interest income in their books though they have not received EMIs. Since it is a moratorium period no new NPAs.   

Is this rally sustainable?? No, it’s impossible. Then when will this bubble burst?? It may be a week or a month or a quarter or two. We have already reached almost 60% of fiscal deficit in the first quarter of financial year. Unless Government opens the economy we may not achieve budgeted tax collections. Right now RBI has increased overdraft limits of state governments still many state governments are not in a position to pay salaries of employees. In private sector and MSME we have already seen so many job cuts. Situation is very bad on the ground. We locked down our economy when there are just 500 odd covid-19 cases and after 3.5 months we still reached to more than 8 lakh cases.

We may see so many NPAs in next 6 to 12 months. All leveraged businesses are in big trouble. So avoid buying leveraged companies. Bear market always gives you a chance to buy good stocks at cheap valuations.  

 

On technical front, Nifty is taking support of the trend line shown in the chart. Near term support of this trend line comes around 10500. If Nifty closes below 10500 on weekly chart, please exit all your long positions and wait for more correction.

To conclude, this is just a bounced back. So use this opportunity to exit your long trades. I repeat, you will get a chance to enter again at much lower levels. Happy Trading!! Stay Healthy and wealthy!!

Perfect time to enter equity through Mid-cap stocks!!!!

I had recommended to book profits when loksabha elections (May-2019) results came out. I had mentioned 12000 is upper side for Nifty and support will come around 11000. As I expected, after election results Nifty made a High of 12104 and then came down to 10700 levels. Though Nifty started it’s sell off after elections results but Midcap and small cap stocks started its correction from February 2018 (Introduction of Capital gain tax).

Since last 2 years Midcap and Small cap indices have corrected more than 25%. Normally corrections in Indian stock markets are of 13 to 21 months, so most probably correction is over. On technical front, BSE Midcap index has given breakout of falling trend line since January 2018. Now it has started sustaining above that resistance line. In last 2 months Midcap index has outperformed Nifty and SENSEX. Normally Midcap and Small Cap indices start out performing in the Bull Run. So I recommend to increase exposure in Mid and Small cap Stocks.

Selecting Mid and Small cap stocks is difficult task. Ideally one should invest through Midcap mutual funds rather than directly investing in stocks. 

Following are good Midcap funds to invest.

·         Axis Midcap Fund

·         DSP Midcap Fund

·         Kotak Emerging Equity Fund

·         L&T Midcap Fund

·         HDFC Midcap Opportunities Fund

On fundamental front, data is still not that positive. But RBI and Govt have taken steps to boost the economy. It will start giving results in next 2-3 quarters.  This year Kharip crop got damaged due to extended monsoon but Rabi crop is very well due water availability. I am hoping that rural demand will increase in next 2-3 months after harvesting of Rabi crop. Right now external factors are more damaging sentiments. Market has corrected this month due to corona virus in China. I think this is blessing in disguise. China has become manufacturing hub for entire world. Now India has a chance to become second supplier to world. I hope more foreign companies will start manufacturing units in India.

To conclude, one should start investing in Midcap and Small cap stocks through Mutual fund route for next 3-4 years. (Low interest rates, low inflation and adequate liquidity)I don’t think we will get such opportunity every now and then. So don’t miss this opportunity of minting money.

Happy Investing!!! 

Golden Opportunity to Invest in Gold

Gold made a high of  $1900 in 2011 and then started coming down. Gold made a low of $1050 in the year 2015. We had predicted that in 2016 that Gold should create a base around that level and start going up again. In that blog we had predicted Gold will touch 31000 and next target would be 55000 ( $3000).

Please check link
http://dhaneshbhagwat.blogspot.com/2016/01/gold-bull-run-will-start-soon-all.html

Now Gold has given Buy in all the currencies i.e. USD,Euro, GBP,JPY, Swiss Frank & Yuan. Since last 5-6 years Gold has given negative returns only. It starts performing when nobody expects.  This is peculiar  characteristic of Gold.

Don't miss this Gold Bull run. You can take benefit of this Gold bull run in following ways.

1. Buy Physical Gold
2. Buy Sovereign Gold Bonds ( Where you will 2.5% interest also)
3. Buy Gold ETF
4. Mutual funds ( DSP BR World Gold Fund & Kotak World Gold Fund)
5. Stocks : Following stocks can outperform the market when Gold is in Bull run.

             MCX India, Titan, Manappuram Finance, Muthoot Finance 

To Conclude, this is the best chance to mining Gold so don't miss the opportunity.

Time to book profits and preserve the capital....

Most of the people hate stock market because of its volatility and uncertainty. Now the stock market is entering into that phase. There are so many events lined up , global as well as local. One of the most important event " Loksabha election result" will come in next few days. Because of that market can be very volatile. If you are on right side of the market then you will earn huge profits or vice versa. To be very frank election results impact will be very short term in nature, may be a quarter or two.

Ultimately market follows fundamentals. Stock market is function of corporate profits, if earnings are not catching up we will not see capital appreciation either. Analysts are expecting earnings growth since last 3-4 years but we have not seen much improvement in earnings. Market has gone up just because of liquidity. Since last 4 years NIFTY EPS is just moving in the range of 390-410. Any negative news can take market down heavily. It can be Local or Global. It can be Election results or US-China trade war or Brexit or anything else. Always remember fear is always greater than greed. So stock market falls are always faster than rallies. If we preserve our capital in these falls then only we can enjoy the up move of the market.

Right now market has discounted that NDA will form the govt. If actual results deviate from this then volatility will increase. So one should book partial profits and exit 50% stock portfolio before election results. If NDA forms the govt and Nifty goes above 11800-12000 levels then book full profits and wait for correction. If NDA wont come to power, one should book profits and wait for more correction.

On Technical front, momentum indicators are giving negative diversions on Daily, Weekly and Monthly charts. Major Support for NIFTY is around 11000-11100.Major resistance will come around 11800-12000. 

To conclude, any rally must be used to book profits and wait for correction.The correction can be price-wise or time-wise. In short  Long term bull run in Indian economy is still intact but we can't ignore short term correction. Happy Investing!!!!

USD/INR View: Short USD/INR Future at 66.80 for target of 63 and 59

Since last 5 years US Dollar was appreciating against Indian Rupee. It made a high of 69.20 in February 2016. But now the trend will change soon. If USDINR breaks 66.15 on closing basis, it will give confirmation of down trend. Second level confirmation will come below 66.

On Daily chart, USDINR has already given sell below 66.72. It has created Island Reversal pattern. Now 200 days simple moving average placed around 67.35 which will act as a resistance. Now support will be in the range of 66-66.15. Below that support we may see a sell- off in the US dollar.

USDINR has broken major support line on monthly chart in March and made a low of 66. After making a low of 66.15, it retraced 61.8% and made a lower high of 68.25 (Support line has become Resistance line). If USDINR gives close below 66.83 on monthly chart, it will be engulfing bear candle which is also bearish pattern.

Normally there is 30 paise difference in USD spot and one month future. That 30 paise difference is basically interest rate differential between two countries. Now Spot is around 66.50 and October future is around 66.80. Let us assume spot will be as it is for entire October month. So if we sell one lot of future at 66.80, it will come down to 66.50 on expiry. So by selling one lot future we will earn Rs.300 per lot (0.30 * 1000) on investment of 1500.

To conclude, one should sell USDINR October future at CMP (66.80) with stop loss above 67.50 for targets of 63 and 59. 

Sensex may Hit 100000 ( One Lac) by 2022

Last April, I had predicted correction in Indian Equity markets and Sensex corrected around 25% from its all time High (Sensex - 30000 to 22500). As explained in my last year’s blog, corrections are painful at the time but a very healthy part of whole mechanism. Now it’s time to BUY once again for long term. In my opinion market will create a base around 23500-25000 in a month or two. So start buying good stocks to achieve your long term goals and dreams.

Fundamental View

Lower  Crude Oil:

Global economies are still under pressure. Europe, Japan is in recession. Though US have started increasing interest rates after 6 years but the pace of rate hike is still low. China economy is also slowing down. Because of global slowdown Crude oil hit 12 years low. Technically Crude oil will not go above $60 for next 2-3 years at least. Overall crude oil fall is helpful for India as we import almost 80% crude from abroad. We are going to save lots of currency reserves because of lower crude rates.

Above average Monsoon:  

Last two year’s monsoon was below its long term average. IMD is expecting normal rains this year which will improve rural economy. The Seventh pay commission will also help in increasing demand from rural sector.

Lower Interest Rates:

If it rains normal then overall food inflation will be under control and RBI will have some more room to cut interest rates.

Majority in Rajyasabha : Since last two years, NDA government faced lot of problems in Rajyasabha. Currently Congress has majority in rajyasabha but in next two years strength of NDA and UPA will become almost the same. In that case with the help of other regional parties NDA can clear major bills in both the houses.

Indian GDP:

India got independence in the 1947 but it took 60 years to become 1 Trillion $ economy. In 2007 Indian economy surpassed 1 trillion $ mark. To become 2 trillion $ economy India took just 7 years. Overall Indian economy is in sweet spot; if everything goes right we will start hitting 8-9% GDP growth. Now India will become 3 trillion $ economy in next 4 years and 4 trillion by 2024.  

Technical View

Short Term View:

On Daily Chart Sensex is forming Inverted Head & Shoulder Pattern. Sensex should make a short term Top around 26000-26300. We may see some profit booking around this level. Sensex will create second shoulder of a pattern in this profit booking. It will make a base around 23500-24500 in next few days. One should start accumulating good Stocks on this correction. This will be the last correction.

Long Term View:

Sensex is still maintaining its long term support line. Support for this year is around 22000-22500, we will not see major sell off unless Sensex gives close below its support on yearly chart. Now the chances are very remote that Sensex will make a new Low. From 1988-1992 Sensex became 11 times, so we saw 11 years sideways correction after that Rally. Same thing happened 2003-2007, in 5 years Sensex became 7 times. We saw a sideways correction of 7 years from 2007 to 2014. Now Sensex has made a good base for next Rally. India, the fastest growing country in the world has become favourite destination for FII. 

On the basis of Historical data, I am expecting sensex to hit 1, 00,000 (One Lac) by 2022. Some people may think this is impossible but I am just following the charts. Please don’t miss this mother of all bull markets. Happy Investing!!!!

Gold Bull Run will start soon; all investors please fasten your seat belts for next Gold rally…

Since December 2013 Gold was in correction mode. It came down from 35000 to 25000 in last 3 years. As per my expectation it made a base around 25000. Now it will start rallying again. 

http://www.dhaneshbhagwat.blogspot.in/2013/04/long-term-trend-is-still-bullish-in-gold.html

Gold will always outperform when Global markets are in financial trouble. Currently all world economies are facing big financial problems. All major central banks have pumped liquidity in to the economies by lowering interest rates and through Quantitative easing. Still economies are not performing that well. So countries have started depreciating their currencies to support exports. 

Technically also Gold has made bottom near 24500-25000 levels. Now it will be very difficult for Gold to break that level easily. Momentum indicators are also giving Buy signal on Daily, Weekly and Monthly charts.

To conclude, one should Buy Gold Future at CMP-26750 with Stop Loss Below 25500 for target of 28500, 31000 in next few months. Gold will touch 54000 by 2020.

Those who want to take position in spot market, they can buy Sovereign Gold Bonds issued by RBI which will give 2.75% interest over and above normal capital gains.