Dalal Street and Budget | Stocks and Commodities

February 28, 2016
Time: 10 am

Dalal Street and Budget:

1. I will write the 'Dalal Street Week Ahead' tomorrow and we will just focus on Budget today.
2. As I have stated earlier, our markets performance was worst in the last 10 years from Budget 2015 to Budget 2016.
3. Also worst performance in last 8 years from Feb. 1 to Feb. 29.
4. So we are going to Budget with most pessimistic outlook.
5. Last time I saw such a severe selling by FIIs in 2011 when European problems surfaced.
6. In 2011, Nifty fell from nearly 1000 points between Jan 1, 2011 to the Budget  day. The low was formed on 10 February, 2011.
7. This year also Nifty has fallen more than 1000 points between Jan 1, 2016 to the Budget day. The low was formed on 12 February 2016.
8. Both the sell offs were due to huge FII out flow.
9. If 2011 has to repeat, then Nifty is likely to shoot up 2% to 3% and by April 2016, Nifty should shoot up by another 6 to 8%.
10. The next correction should come only in May 2016 along with global correction that usually happens in May.
11. Remember the saying "Sell everything in May and Go away".
12. Since all negatives are seems to be factored in, even if Budget disappoints, markets may not fall much.
13. But there is one danger to this theory, since we are just about 150 points away from 52 week low, any breach of that level will surely crate huge panic and markets may fall drastically in the very short term.
14. On the other hand, markets have been in panic mode for the last few weeks and there was no meaningful buy from LIC.
15. This may be due to two factors, one, they do not want to buy and lose more money if markets continue to fall as they do not see the value in the markets yet.
16. Second, they may be waiting for a trigger, so that when they enter, markets will also turn around and markets move higher so that they do not lose. Budget may well be that trigger.
17. So if there are some positive surprises and LIC enters the market then things may change.
18. Even if markets are higher by afternoon, we do not know how much of FII selling will happen in the afternoon.
19. PSU Banks recapitalisation announcement will affect the PSU Banks.
20. Old car scrapping scheme, 7th pay commission implementation will aid two wheelers and four wheeler stocks.
21. Any announcement regarding increase in Tax on tobacco products will adversely affect ITC which is already reeling under pressure.
22. As long as Fiscal deficit is 3.7 or less, markets will be happy.
23. So tomorrow is a make or break market.
24. If Nifty crosses 7250, further short covering will take Nifty to 7700 to 7800 levels in the next few weeks.
25. If Nifty falls below 6900, then further selling may drag the Nifty to the next support level of 6900 in the next two to three weeks.
26. We will be happy if Nifty crosses at least 7200 tomorrow.
27. India VIX is likely to fall by 10% if Nifty rises and likely to rise by 10% if Nifty falls.
28. So be ready for roller coaster ride tomorrow.