Budget Rally or New Bull Run?

Markets have started rallying again. Analysts have started speculating about the beginning of a new bull run. Pessimism has been pushed aside and optimism has again taken a front seat. Don't get unnecessarily sucked in at higher levels on the back of speculative and liquidity based rally before Budget to be announced on July 06 (Rail Budget on July 03). It is quite possible that the rally may last a bit longer even post-budget if the announcements are even trifle better than market expectations. Another reason that the rally may last a bit longer could be that markets would like to wait for India Inc's quarterly results for more clarity on earnings which would be announced in the month of July.

But, how much more legs can this linear rally have? Remember, the ongoing rally is largely liquidity led which can dry up anytime. When sentiment turns, the same analysts which are forking out psoitivity and optimism will tweak their views depending upon the situation.

I would say sell 10-20% of your portfolio at higher levels. Sell at higher levels on every rallying day in small quantities. Especially, square-up at least 70% of your Trading positions on or before July 06 to be on a safer side.


Kalindee Rail and Educomp Solutions:

Both Kalindee Rail and Educomp were in hibernation mode in today's market after a steep rally in last few sessions. But, they'll again start rallying before their respective 'B' day. Railway Budget is to be announced on July 03. So, Traders should exit and book profits to the extent of 70% in Kalindee until one day before Rail Budget and remaining they can still consider holding until July 06. Investors can still hold Kalindee with long-term perspective or they can as well sell 20-30% holding and stay invested in remaining. The entry call for Kalindee Rail was given at Rs.135/- as both for Trading and Investment perspective.

Sell 70-80% of your holding in Educomp stock from today to until a session before Budget. You can carry on with 20-30% of this Education counter for post-budget rally, if any. Government can no longer leave Education spending and reforms at bay. However, booking gains is must, do not remain stuck with trading calls. This stock may reach dizzying heights even from current levels of Rs.3500/- in a matter of next few sessions, more aggressively as we approach July 06.

In my posting dated June 02, Time to Re-think Strategy, I had recommended readers to exit part positions in expensive large-cap valuations and remain in cash or shift to Defensive counters like Dabur, Cipla, ITC, etc. Cipla has appreciated 20% since then and Dabur is showing around 10% gains from that day. On the other hand, heavy weight RIL is down 10% from the day of recommendation. The recommendation was only for part-liquidation or shifting strategy and not whole holding. L&T and BHEL are almost at same levels since then, but now with a positive bias.


Which Stocks shall lead before Budget:

These are not Trading/Investment calls. The time to take speculative position before budget is a bit behind us. Though, it may prove worthy to hold these stocks for next few days if you already hold them at lower levels. The below mentioned list is just a summary/guide as to which all stocks may find favour in next 10 sessions based on speculation and drama before Budget announcement:

1) IDFC
2) BHEL/L&T
3) REL/IVRCL/HCC
4) PFC/REC/LIC Hsg Fin.
5) Educomp/Everonn/Aptech/NIIT Ltd.
6) Kalindee/Titagarh Wagons
7) Torrnet Power
8) Rallis India
9) IOC/HPCL
10) SBI

Some erstwhile trading favourites based on Budget theme like Alok Industries, Bombay Dyeing, NMDC, MMTC, Coromendal Fertlisers, etc. have lost momentum in very near-term. It remains to be seen whether some of these stock can regain their lost sheen before the 'B' day.

NMDC sought support around its crucial support levels of Rs.360/- as discussed in the 'Comments' section by me, but the stock has still not picked up the momentum from there. The stock needs to cross Rs.395-405 zone to pick any kind of further momentum. Whereas MMTC needs to cross Rs.33500-35500 levels for signs of futher optimism in the counter. Textile favourite Alok Industries needs to cross Rs.24.50-26.50 for any fresh upside rally.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Medium-Term Broad Range: Nifty 3150-4250

There is a query from Dark Knight Abhay in the Comments section regarding Market Outlook from the Short-term horizon. He has bought a few trading stocks around Nifty 3600-3650 levels.

Hi Viral,
You commented earlier that if nifty has a weekly close of 3550,it may touch 3800-3850 levels. So do you still recommend that one should hold on till 3800?

My Reply:

In very short term , Nifty is largely range bound in 3600-3720 narrow band. Previously, when i had recommended an upside break-out for Nifty at 3500 levels which was a crucial hump for the markets, the recommended levels of 3550 was only for confirmation of risk-free new break-out trend. This break-out indeed happened for the good, and we tested almost 200 points higher @Nifty 3700 during one of the trading sessions in the previous week. A 200 point break-out on Nifty above 3500 is a good appreciation in actual terms.

In very near-term, markets are undecided about its next move & thus consolidating in 3600-3720 range. May be, quite possibly, markets are somewhat over-bought what with a humongous rally in Nifty since 2600 levels witnessed just a couple of months ago.

Dear Abhay...My targets of Nifty 3850-4250 are from the perspective of MEDIUM TERM broad range and not short-term horizon. Just like we consolidated for 5 months in 2500-3150 range , the next big trading range for markets from now on may well be 3150-4250.

That does not mean Nifty 3850 are up for grabs in a unilateral fashion in a vertical climb-up. Markets should, ideally, move down or consolidate before touching such dizzy targets. One never knows... may be, market consolidation within Nifty 3600-3720 could as well be a part of that much needed cool-down. In any case, if market surprises by unilaterally inching up following positive global cues, than the upside would definitely be capped around Nifty 3800-3850 before any other major up-move towards 4000-4200.

But, all-in-all, chances of a big cool-down in the range of 3150-3350-3720 is high for next few months seeing at the proportion of market rally we have had in last two months.

For Your Trading bets...
For BHEL, IDFC & Videocon i've clearly mentioned targets and Stop loss levels in my previous postings. IDFC looks strong unless it can sustain above Rs.82 on closing basis. BHEL has a strong support at Rs.1500. Two other calls were given in my previous post on Suzlon and HCC which are depicting strong trend on the upside. Stop losses are a must for any kind of trade be it for short-term or medium-term.

CONCLUSION:

My View: 3150-4250 is Medium-Term Broad Range.

Option 1: From here markets look over-bought in very near term outlook & Nifty may as well take a breather with Support @3500 & ultimate support @3350.

Option 2: Markets may surprisingly keep on rising if constantly backed by positive global cues. But, then, there may be an upside cap around 3800-3850 in short-term.

Chances for option 1 to fructify is strong, but one cannot rule out a small up-move from 3700 to 3850 in near term driven by continuous momentum around the globe. Momentum can sometimes over-ride fundamentals & valuations. Political outcome has the capacity to turn any form of trade on its heads.

I would say, book Part profits even in your short-term trades. When markets are so much inflated in so little a time horizon, it is better to play safe partly. Reduce your risk but still don't give up all your positions. Fresh Buying is recommendable around Nifty 3500-3550. And, an Aggressive Buy is thoroughly recommended around 3350-3450 range for Trading purposes.

Long-term Investors:

Investment Buying to be done around Nifty 3150-3350 range. Long-term Investors should wait with patience and perseverance. Markets have given a break-out on the upside after a long consolidation of 5 months. The old range of Nifty 2500-3150 holds no more & a new range of Nifty 3150-4250 has developed which will stay over here for quite some while. So, for those who missed value plucking around the bottom of Nifty 2500, can plunge in around Nifty 3150-3350 range which is somewhat a starting point of 3150-4250 broad range.

Most of the long-term investors have had a missed out feeling of not being able to buy around market bottoms. So, now these unleashed funds will come out for shopping on every dips and support the market on every dip and consolidation. So, funds on sidelines should maintain caution & patience. In the short-term, it would be difficult to see markets below Nifty 3350-3400 levels.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any nature for your trading and investment decisions and its consequent results.