NIFTY - SENSEX

NIFTY - SENSEX

Bad news is good news for the markets. That seems to be the correlation globally and in India. Internationally Mr. Ben Bernanke is supposed to step down end of Jan as chairman of the FED and Ms. Janet Yellen is to take over as the Chairwoman of the FED. She is in favour of continuing low interest rates and the bond purchase program, which currently is at 85B per month. In other words she plans to continue quantitative easing. Moreover in the US the debt limit ceiling is coming on the 7th of FEB which should normally make the markets nervous. However we can see the reverse happening. The DJIA is at an all time high.

We see similar things happening at home. An interest rate hike is inversely related to the stock market. As rates go up stock markets come down and vice-versa. However our new governor Mr. Raghuram Rajan has raised rates twice since taking office in September this year and is expected to raise it once again in the December meeting, the markets have reacted positively to this and the Sensex as well as Nifty rose. Currently the Nifty has corrected but I will expect it to go to 6800 before elections. Likewise the SENSEX can also be expected to go to 23K. So we see that bad news is good news at home also. Generally speaking markets correct before elections or remain subdued, however our markets are bullish. Most likely the correct would come after elections.

Technically also one cant see any signs of reversal in the market at this point. The worrying factor remains that not all the sectors are reacting positively. One can trade but be careful and keep a stoploss to exit quickly. With more and more money moving into stock markets over the years, markets have become volatile. They go up quickly and come down quickly as well. Swings are huge. For times to come that is how markets will behave.

 

Gold

Yesterday in the Times of India of 10th November 2013, I was reading an article by Mr. Gurcharan Das on Gold. He pointed out many factors taken by RBI (Reserve bank of India) because of which gold prices got a bit deflated and he expects gold prices to come down in the future.

In my Analysis the exact reverse is likely to happen. Despite the surprise Interest rate cut by the ECB gold held on above 1300 USD. It was only on Friday with some good numbers of Non Farm Payrolls coming from the US that Gold actually went down. I do not expect gold to go lower than 1261 this month and then to slightly recover to around 1300 levels by month end. Next month gold might try the low once again, the reason being that in January Mr. Bernanke is to leave office and in all likelihood Ms. Janet Yellen is to become the new FED Chairperson.  So, though gold usually is bullish in December and January it is likely to get bullish only in January end or beginning of February 2014. I expect gold to close around 1350 by the year end and see every dip as a buying opportunity.

Moreover with Money printing continuing gold and silver will benefit as currencies globally lose value. As far as the Non Farm Payroll numbers are concerned they are usually good during this time of the year due to approaching Christmas and new year holidays. Moreover the number is a surprise because the numbers have gone up even though there was  a US shutdown which is likely to happen again on Feb 7^th the next date for the debt limit to end.