The markets recouped all the losses made last week and back to where they were at the end of January. The AAP victory was digested and all eyes are on the Budget.
1. It is said that in Bull markets all the bad news is ignored and in Bear markets all the good news is ignored. The markets have shrugged aside the AAP victory, the sucking out of liquidity by Coal India (NSE:COAL) and HDFC issues of about Rs 30000 crores and are very close to their all time highs.
2. The next major trigger is the Union Budget. If the market is at all time highs near the budget, it is prudent to lighten one's positions as the markets may correct after the budget. Expectations are high and any disappointment can lead to correction. Another feature of the Budget this time is that it is on a Saturday, giving people time to digest the news as the markets will be closed. This also means no time to exit the positions as the markets will open gap up or gap down on Monday.
3. The FIIs have sold on all trading days in February except the last day on Friday. They have sold about 3500 crores worth of shares and the markets have not moved. It means in FII inflow absence the markets will not be able to move up.
4. The Global cues remain supportive for the continuation of the up move. If we look at the markets technically, then a close above 8900 opens the doors for a close above the previous highs.
5. The crude oil prices have increased from about 45 dollars to a barrel to about 60 dollars a barrel. This level is to be watched. Any further increase in crude may affect the markets. 60-70 dollars to a barrel is the optimum range for the Indian Markets.
6. The 10-Year G-Sec yields seem to have to stabilised at about 7.7 pc. The yields tend to bottom out at around 7 pc and top out around 9 pc.
All in all, good times for the markets but profits need to be booked just before the budget in case the markets are riding high. If we get a not so good budget then we are headed to 7500-8000. In case, we get a good budget then the rally may just extend.
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