Tuesday, December 17, 2013

Economic Recovery in US may Rattle Indian Markets

As this graph shows, Indian markets are closely related with FII inflows and potential of Indian market is not the only factor that decides these flows. Liquidity is one key factor and if Fed decides to taper the $85 billion that it is pumping into the system every month, liquidity is definitely going to be curtailed. Fed meeting concluding tomorrow may take a decision on it or may postpone it depending upon whether the US growth is strong enough and meeting the targets set by it. So, a decisive strong US growth may lead to tapering, and that may lead to flight of FII money from emerging markets – including India. Chances are low that Fed will decide to act in December, most economists expect it start tapering by Feb or March and that too in small measures. One needs to understand the US recovery to get an answer to the tapering issue. We are analyzing below the key indicators that show health of US economy.

Rise in lending

The most telling data point, is the use of this $85 billion monthly, where is it going? Though most of it is being kept by banks again with Fed to get 0.25% meager return; but an increasing part is being utilized for more productive purpose. As this graph clearly shows, the loans are increasing – and it is the most direct indicator of improving health of US economy. It has been rising at double digit rates for last two years. Banks are flush with money and the fact that there is a constant rise in lending strongly indicates banks are willing to lend and businesses are willing to borrow. It shows a rise in confidence and that is the underlying force that is slowly but steadily driving the US economy. Contrary to what you may read in papers, the Fed money is being utilized in an increasingly productive manner and it is definitely stimulating the economy.

Recovery in Housing Sector
Housing sector is one major pillar of US economy and though it is not at its usual top levels, it has staged a strong recovery and is constantly rising. Homebuilding seems to be holding up decently in the higher mortgage rate environment, probably due to the support of strong underlying fundamentals - thin inventories and steady household formation. In October, the housing starts reached highest since last four years and represented the fastest pace of new-home construction since July 2008.

Strong Auto Sales
Since 2009, the auto sales are on a constant rise. US car sales are now close to a six-year high as consumers grow more confident about an economic recovery. The industry has shifted into high gear with new-car buyers snapping up vehicles at a pace not seen since before the financial crisis.
Japan's carmakers Toyota, Honda and Nissan, as well as the US's Ford, General Motors and Chrysler have seen double-digit growth. The jobless rate has been going down, manufacturing and property prices have been picking up, interest rates are low, and slow-but-steady job growth are encouraging consumers to trade in cars and trucks that average about 11 years old, say auto makers, which are adding production capacity and overnight shifts to satisfy demand.

Rising retail sales – a reflection of confidence in recovery
Consumer spending is the core of US economy and as reflected by retail sales which account for about 30 percent of consumer spending, has been rising solidly, adding to signs of a strengthening economy that could draw the Federal Reserve closer to reducing the pace of monetary stimulus.
Spending is being supported by solid employment gains and steady income increases. Lower gasoline prices are also helping.


The most direct indicator of recovery – Industrial Production
Industrial production has now reached a new all-time high.

The contrast between the vitality of the U.S. economy and the ongoing struggles of the Eurozone economy is stark. As it is, all the evidence points to a substantial and ongoing recovery in the U.S. Things could be a lot better, but the pervasive negative sentiment regarding the health of the U.S. economy is way overdone.

Positive indications of industrial growth


 





Consistent rise in capital goods orders, crude oil production, and Baltic Dry Index, all reflect a recovery in industrial activities.
Back in July 2008, U.S. crude oil production was just over 5 million barrels per day. At that time, nobody would have predicted, even in their wildest dreams that crude production would increase by 60% (to 8 mbd) by the end of 2013. But it happened, technology playing a big role.
BDI is a proxy for increased trading activities – as shown by more demand for shipping of goods by sea routes. The Baltic Dry Index measures the cost of shipping bulk commodities in the Asia/Pacific region. It is a function of two major variables: the supply of shipping capacity and the demand for shipping capacity. Prices were depressed for most of the past several years because of a significant increase in shipping capacity. More recently they have rebounded rather strongly, presumably because economic activity is continuing to increase (e.g., Chinese demand for coal from Australia) while shipping capacity is relatively constrained. As such, this appears to be signaling a somewhat stronger global economy, which would in turn support a stronger U.S. and Eurozone outlook.
In 2003, natural gas prices on average reached their highest level ever relative to crude oil. Now natural gas prices have fallen by 75% relative to crude oil prices, thus conferring a unique advantage to U.S. industrial energy consumers, due to the difficulty of exporting the growing relative abundance of U.S. natural gas supplies. It happened due to fracking technology. In fact this Great American Energy Boom might qualify as the most important economic story of the past decade.

Improved Loan Repayments by Retail Consumers
This chart shows the average delinquency rate on credit cards and all consumer loans. Both of these indicators have fallen dramatically since the Great Recession, to the lowest level in over 20 years – showing better consumer financial position. Moreover, as of last October, the average 30+ day delinquency rate on credit cards issued by the top six issuers (Amex, B of A, Capital One, Chase, Citibank, and Discover) was a mere 1.9%. It's never been this low, and that is very good news for banks as well as households. Banks' profit margins are up, and households' financial health is greatly improved, thanks to deleveraging and more responsible risk-taking.

Unbelievably Risk-Averse Rally!
This chart shows the leverage of the household sector. Total liabilities as a % of assets have fallen by almost 25% in just over four years, taking household leverage back to levels last seen in the mid-1990s. In the past 70 years there has never been such a dramatic deleveraging of household balance sheets.





Conclusion:
US economic recovery appears slow but steady. But when the Fed will start tapering is uncertain.

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Monday, December 9, 2013

Public Mandate Strongly Favorable for Markets


Rout of congress in three states and strong show by BJP indicates 2014 may see BJP in center with clear majority. It indicates strong probability of a stable and pro business government at center – and market will definitely welcome it.
We have been repeatedly saying that the market is in uptrend and we expect Nifty to cross 7000 in 2014. There was one more positive news last week – the current account deficit fell sharply to 1.2 percent of GDP, in the July-September quarter of this fiscal. It was helped by decline in gold imports (due to rise in import duty) and turnaround in exports.
We reiterate that there are immense gains possible in long term investments if one picks up the right stocks now. 2014 is going to be a year of major transition for India, and we hope you do not remain on the sidelines missing this great opportunity. Stay tuned and do contact us to gain from the India’s growth story which is yet to unfold its full glory.

Risk Factors in Indian Equity

Though yesterday's election results are a big positive for markets as they indicate expectation of stability, there are still some major concerns -

1. Rupee Depreciation: It has helped exporters but one can not overlook India's imports, especially oil. Everyone has seen the drastic impact of Rupee's recent fall on equity markets.

2. Inflation: It is staying at a very high level and can spoil the growth of market. RBI has not given any signs to lower rates which is desparately needed by the industry. If inflation does not come down, it will be tough to lower rates and without that, industrial growth can not pickup.

3. Current Account Deficit: It has come down sharply to 1.2 percent of GDP, in the July-September quarter of this fiscal. It was helped by decline in gold imports (due to rise in import duty) and turnaround in exports. More subsidies will further deteriorate CAD. Another grave threat is in form of capital account outflow of Dollars in wake of a resurgent American economy. A revival there threatens to suck capital, and economic dynamism, out of many emerging-market economies.

4.  Oil Prices: India imports some 80% of its oil requirements and any big rise in crude oil price will destabilize our economy. India will be the largest source of oil demand growth in world after 2020, and by 2035 it will be the second largest oil importer after China.  Now oil is increasingly becoming more and more critical for our economy and rising tensions in gulf countries is a big threat.

As an investor, one must understand the importance of these issues and should be analyze whether these issues will block India's growth or not. Contact us to know the answers and invest without stress.

Sunday, December 1, 2013

Nifty may cross 7000 in 2014




















If Nifty remains above 6200, there are strong indications that it may cross 7000 in 2014. The major bullish factors in brief are –

  1. Nifty future gave a breakout in October above its previous monthly highs of 6162.95 (in Dec 2007) and 6162.55 (in Dec 2010). It is still above this level and if it does not go below it, it will make new highs in 2014.
  2. Nifty has broken upwards out of a rising triangle formation which is a clear bullish signal.
  3. After falling below the speed resistance lines (three blue lines) in Aug, the Nifty is again comfortably above the last of these support lines. It is bullish as long as this support is not broken.
  4. MACD has turned bullish again
  5. Trikaal Long Term Cycle Indicator has turned upwards indicating uptrend may be continued.
Next major Fibonacci level is 6938 which may be achieved in this rally by Mar 2014 if it continues. Downside probabilities are low but if Nifty falls below the last blue line support, it may go down upto 5700-5500. There are excellent investment opportunities that exist right now and one should not miss them. Even though trend is up, not all sectors are expected to perform well, one should be very cautious in selection of sectors and stocks.
Proper portfolio management can give 40-60% or even more return this year.

Thursday, November 28, 2013

Growth Opportunities Portfolio - Automotive Sector

Almost 3 billion people, mostly from emerging markets – more than 40% of today’s population – will join the middle class by 2050. This will increase the share of consumption demand in emerging markets from one third of global consumption to two third by 2050.

And when 3 billion people in emerging markets get rise in income, the market for discretionary items is set to explode. And the biggest of these markets are going to be China and India. One of the biggest beneficiary of this change in consumption pattern would be automotive sector.

This is going to happen because as of now we are at very early stage of development, as workers are increasingly better equipped with more machinery and technology and their level of skills rises, their productivity will increase, GDP will continue to expand and alongside it the workers’ real incomes.


Automotive Sector Research Report - Click here to download

Tuesday, November 26, 2013

Growth Opportunities Portfolio - 26 Nov 2013

In this portfolio, we recommend to invest in growth shares for multifold long term profits. Some examples of recommendations since 2010 -
1. Tata Motors - Current price Rs 380, recommended in 2011 Oct at 155
2. Asian Paints - Current price rs 516, recommended in 2010 Nov at 271
3. Sun Pharma - Current price rs 580, recommended in 2010 Aug at 176

These recommendations are based on long term themes that are part of India's growth story. For example, our research has shown automotive sector to be one of the biggest gainer from India's growth. And we had picked up Tata Motors due to its global reach via JLR.  We would soon be publishing our report on Automotive Sector.

Change in Daily Research - 26 Nov 2013

We are stopping Daily View on Dollar Index and Daily Recommendations on stocks trading. We will post Dollar View when we expect any important change in its trend.

Tuesday, November 19, 2013

Monthly Return Hedged Portfolio - 4.2% ROI in Nov 2013



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J. Paul Getty

Daily Recommendations - 19 Nov 2013

Open Positions - Hold Dabur. ITC exceeded tgt 321, SRTRANSFIN met target 600, hold POWERGRID for 98

Saturday, November 16, 2013

Daily Recommendations - 16 Nov 2013

Open Positions - Hold Dabur, exit from ITC near cost 321, hold Powergrid for 99-100, SRTRANSFIN for 600

Friday, November 8, 2013

Daily Recommendations - 8 Nov 2013

Open Positions - Hold Dabur and ITC. Crompton met its tgt yesterday. Hold LT for its tgt with trailing SL 865, hold Adani for 208 with TSL 213.

New Positions - Buy Powergrid near 94-95, buy SRTRANSFIN on dip between 560-570

Daily View - Dollar Index, 8 Nov 2013

Trend, Momentum, and S/R Levels


Review of previous Analysis:

Trading recommendation – none
S/R Levels – Partly Correct
Direction View - Not given

Price reached 81.565 (our resistance level was 81.25) and made a low of 80.52 (near our support level of 80.6/44).

System Analysis:

Analysis
Minor Cycles
Near top
Intermediate Cycles
Turned Up, but end of downtrending not confirmed
Major Cycles
Approaching Bottom

System Signals: Major cycle is near bottom so direction should be up from here but minor cycles may cause a correction.

Conventional Technical Analysis:

Bearish setups –
1. Momentum indicating overbought price

Bullish setups –
1. Price has crossed above 30 DMA
2. Price has crossed above down channel
3. Price has crossed above speed resistance line
4. Price has crossed above 38.2% retracement level of 80.5

Price has all bullish signals except momentum which may cause a correction.

Key S/R Levels:
• Resistance Levels: 81.1 - 81.54
• Support Levels: 80.5 - 80

Risk: Buyers may not see a dip.

Recommendation: Wait for a correction to buy near 80.2.


Thursday, November 7, 2013

Daily Recommendations - 7 Nov 2013

Open Positions - Hold Dabur, Adani, LT for respective targets. Crompton almost reached tgt yesterday, if not closed yesterday, close the position today.

New Position - Buy ITC near 321 and hold.

Daily View - Dollar Index, 7 Nov 2013

Due to some technical problems, the Daily View could not be posted today. Inconvirence is regreted.

Wednesday, November 6, 2013

Daily Recommendations - 6 Nov 2013

Open Positions - HINDUNILVR exited in profit on trailing SL at 604.

New Positions - Sell ADANIENT between 215 - 211 tgt 200, buy ITC on dip near 314 and hold, sell LT on rise near 975 tgt 950, sell CROMPTON near 113 tgt 109, buy DABUR near 174 tgt 179.

Daily View - Dollar Index, 6 Nov 2013

Trend, Momentum, and S/R Levels


Review of previous Analysis:

Trading recommendation – none
S/R Levels – Correct
Direction View - Not given

Price reached 80.895 (our resistance level was 80.9) and made a low of 80.575 (near our support level of 80.55).

System Analysis:

Analysis
Minor Cycles
Near Top, may expect minor correction
Intermediate Cycles
Turned Up, but end of downtrending not confirmed
Major Cycles
Approaching Bottom

Conventional Technical Analysis:

Bearish setups –
1. Momentum indicating overbought price

Bullish setups –
1. Price has crossed above 30 DMA
2. Price has crossed above down channel
3. Price has crossed above speed resistance line
4. Price has crossed above 38.2% retracement level of 80.5

Price has all bullish signals except momentum which may cause a correction.

Key S/R Levels:
• Resistance Levels: 80.9 - 81.25
• Support Levels: 80.75 - 80.6 - 80.44 - 80

Risk: Buyers may not see a dip.

Recommendation: 80.75 and 80.6 are crucial supports. Wait for a correction to buy near 80.


Tuesday, November 5, 2013

Daily Recommendations - 5 Nov 2013

Open Positions - Hold HINDUNILVR with trailing SL of 604

New Positions - 

Daily View - Dollar Index, 5 Nov 2013

Trend, Momentum, and S/R Levels


Review of previous Analysis:

Trading recommendation – Closing today in profit
S/R Levels – Correct
Direction View - Correct

Price reached 81.01 (our resistance was 80.9/81.25) and made a low of 80.61 (near support of 79.55).

System Analysis:

Analysis
Minor Cycles
Near Top, may expect minor correction
Intermediate Cycles
Turned Up, but end of downtrending not confirmed
Major Cycles
Approaching Bottom

Conventional Technical Analysis:

Bearish setups –
1. Momentum indicating overbought price

Bullish setups –
1. Price has crossed above 30 DMA
2. Price has crossed above down channel
3. Price has crossed above speed resistance line

Price has all bullish signals except momentum which may cause a correction.

Key S/R Levels:
• Resistance Levels: 80.9 - 81.25
• Support Levels: 80.8 - 80.55 - 80.1

Risk: Buyers may not see a dip.

Recommendation: Book profit in yesterday's short at CMP 80.63. Yesterday when price crossed below 80.8, then it was unable to go above it but did not reach our target of 80.58. Wait for a correction to buy.


Monday, November 4, 2013

Long Tern View - Dollar Index, 4 Nov 2013

TRACK RECORD - Currencies

Accuracy: 100%, ROI: 24% per trade (assuming 2.5% margin, details in 'Performance' tab)
  May Jun Jul Aug Sep Oct Nov
Total Trades 2 1 3 1 2 5  
Profitable Trades 2 1 3 1 2 5  

 

Trend, Momentum, and S/R Levels


Review of previous Analysis:

S/R Levels – Correct - Price took support exactly near first level of 79.
Direction View - Mostly Correct - We expected downfall till Jan 2014 in our 14 Oct post, prices did fell till our first support of 79 but a bottom is now visible at 79 and prices may not fall further.

System Analysis:

Trend: Up

Dow Cycles
Analysis
Minor
Turned up from bottom, expect more rise in prices
Intermediate
Midway crawling, needs a clear movement for a clear indication
Major
Midway down, no indication

Conventional Technical Analysis:

Bearish setups –
1. Price is still below speed resistance lines

Bullish setups –
1. Price has crossed above 30 DMA
2. Price has taken support at its long term moving average
3. Price has taken support at 38.2% retracement level
4. Inverted hammer at previous candle

Price has mostly bullish signals.

Key S/R Levels:
• Resistance Levels: 80.9 - 82.3 - 83
• Support Levels: 80 - 79

Risk: Buyers may not see a dip.

View and Recommendations: Downside seems to be over. Price is above supports of 79 and 80, and System Analysis as well as conventional TA both are indicating bullishness. Next major upside level is 83 which Dollar can achieve by Dec/Jan 2013 on condition that it remains above 80. Avoid short selling, buy on dips.


Daily View - Dollar Index, 4 Nov 2013

Trend, Momentum, and S/R Levels


Review of previous Analysis:

Trading recommendation – Not given
S/R Levels – Correct
Direction View - Correct

Price crossed resistance 80.2 against our view.

System Analysis:

Analysis
Minor Cycles
Near Top, may expect minor correction
Intermediate Cycles
Turned Up, but end of downtrending not confirmed
Major Cycles
Approaching Bottom

Conventional Technical Analysis:

Bearish setups –
1. Momentum indicating overbought price

Bullish setups –
1. Price has crossed above 30 DMA
2. Price has crossed above down channel
3. Price has crossed above speed resistance line

Price has all bullish signals except momentum which may cause a correction.

Key S/R Levels:
• Resistance Levels: 80.9 - 81.25
• Support Levels: 80.8 - 80.55 - 80.3

Risk: Buyers may not see a dip.

Recommendation: Wait for a correction to buy. Sell if price is unable to go above 80.9 and crosses below 80.8, for target 80.58 SL 80.91.


Friday, November 1, 2013

Daily Recommendations - 1 Nov 2013

Open Positions - Andhra bank shot up by over 8% yesterday crossing tgt 58. Hold HINDUNILVR.

Daily View - Dollar Index, 1 Nov 2013

Untitled Document

Trend, Momentum, and S/R Levels


Trend: Down since Sep 2013.
Mode: Trending down.

Review of previous Analysis:

Trading recommendation – Parrtly Correct
S/R Levels – Correct
Direction View - Incorrect

Price crossed resistance 80.2 against our view.

Cycle Analysis: Daily major cycle is trending down but price may rise as it has crossed crucial resistance of 80.2. Major cycles have turned up, avoid selling.
• Sell Signal: -
• Buy Signal: -

Conventional Technical Analysis:

Bearish setups –
None

Bullish setups –
1. Momentum is rising
2. Price has crossed above 30 DMA
3. Price has crossed above down channel
4. Price has crossed above speed resistance line

Price has all bullish signals, expect it near 81.

Key S/R Levels:
• Resistance Levels: 81
• Support Levels: 80.2

Risk: Price may remain volatile.

Recommendation: Avoid trading.


Thursday, October 31, 2013

Daily Recommendations - 31 Oct 2013

Open Positions - DLF and HINDALCO, IDEA did not reach buying level. ADANIPORTS(145) met 1st tgt 149, BHEL(137) met 1st tgt 140. Exit PETRONET(124) at cost. Hold ANDHRABANK, HINDUNILVR.

Daily View - Dollar Index, 31 Oct 2013

--> Trend, Momentum, and S/R Levels

Trend: Down since Sep 2013.
Mode: Trending down.
Review of previous Analysis:
Trading recommendation – Correct
S/R Levels – Correct
Direction View - Correct
Pullback continued yesterday as expected and prices reached the resistance level of 80 (made a high of 79.975) which was repeatedly being mentioned by us since last week. Assuming one sold at 79.95, 1st target of 79.77 has been achieved.
Cycle Analysis: Daily major cycle is trending down and upside is very difficult and more downside probabilities are high. Pullback may continue today as short term cycles are rising.
• Sell Signal: Short term cycles are near peak and a fall is expected..
• Buy Signal: -
Conventional Technical Analysis:
Bearish setups –
1. Price made a new low on 25th Oct indicating trend is still down
2. Price is below the last support of the speed resistance lines
3. Price is below 30 DMA
4. Price is moving in a downward channel and is yet to come out of it

Bullish setups –
1. Momentum is rising
2. Price has crossed above 7 DMA indicating short term rise

Price has turned down from near resistance zone of 80-80.2, it is difficult for price to rise beyond this zone.
Key S/R Levels:
• Resistance Levels: 79.77 - 80.2 - 80.45 – 81
• Support Levels: 79.65 - 79.45 - 79 – 78.5 - 77
Risk: Price may rise quickly to near 80.2 against its downtrend if it remains above 79.77.
Recommendation: Hold short (79.95) for 79.65/79.45 with trailing SL 79.8. (SL level added during the day)