Tuesday, March 1, 2011

Update for 1st March 2011

     Did the Budget Give Any Clear Direction to the Markets ?

  • Fortunately or unfortunately, the last post was given a title:  ' Markets Waiting for Direction from the Budget  !'.  Now this author is forced to do a budget analysis since he himself raised the issue in the previous post.
  • But a bit of background information first. ( 1 ) Most experts, commentators, industrialists etc seen on the TV channels and who write or express their opinions in the news papers do not normally speak the real truth, as they have to be politically correct. ( 2 ) Most readers might have already heard about the budget proposals and come to their own conclusions. That makes this budget analysis difficult and of not much significance. So let's limit the scope of the analysis to a very narrow area. We will start the analysis by asking some questions. OK, here they are ....!
  • Name the stock which gained the maximum after the budget.  Answer : ITC.
  • Did ITC get any benefits out of the budget ? Ans. :  No.
  • Then why did the ITC stock rally hard after the budget ? Ans. : Yeah, everybody and their uncles were expecting some more taxes on tobacco. But no new taxes were proposed in the budget.
  • I see, so the reason for the stock bounces were not the budget proposals but the absence of any higher taxes, right ?
  • Yeah, you are perfectly on the target.  
  • Now let's see what other expected raises were not there in the budget !  Here they are ! No raise of excises duty and service tax to the pre-bear market rates of 12 %, no raising of the dreaded STT or capital gains tax, no new taxes on the corporates and the rich etc.
  • Will the absence of these dreaded increases make a budget a better budget ? Ans : No.
  • Is there anything in the budget to reduce the high inflation, which actually is the biggest tax on the poor ? Ans. : No.
  • Does it talk about the oil price problem and the heavy subsidies ? No. Apart from a promise to disburse some subsidies directly to the poor, there is nothing in the budget. The budget doesn't even acknowledge the problem of rising oil prices and deficit of the oil marketing companies. Even the expectations of a cut of the customs duty on the crude oil  were belied. 
  • So, after all, what is your opinion about the union budget ?  Ans. : It's a budget of no consequences because it implies just the continuation of the present. Just a status quo budget sprinkled with some added masala of make-believe populism. That's all.     

   Nifty Futures - Intra-day Chart

  • The above budget analysis explains the market reaction which otherwise might have been seen as a bit strange. Market, initially, went hung ho in the absence of any duty raises and on the promise of allowing the foreign investors to invest through Indian mutual funds.
  • But after the end of  first wave of the short covering and upon the understanding of the ordinary nature of the budget bereft of any path breaking reforms, stock markets came down erasing the gains.
  • So the next question is: What happens to the market ? Ans. : Well nothing ! The market will do it's thing as if nothing has changed. 
     Nifty Futures  - Daily Chart 

 Nifty Options Scene   

The March series Nifty Options Put Call ratio ( PCR )  declined slightly to end at a normal 1.27 times on  Monday. The India VIX index  closed lower at 24.4, losing 10.52 %.
 Nifty Trailing Fundamentals    
The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 20.42, 3.38 and  1.17 respectively as on  28th February 2011.  ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ). 

 Latest Ultimate Momentum Signal 

 The Momentum Signal closed with -100 value indicating the presence of negative momentum in the market.

Projected Momentum Signal Close Values

The projected levels of Momentum Signal values applicable to various ranges of closing values of the current month Nifty Futures, Nifty Index and the BSE Sensex,  as at the close of next trading day, ie. as on 1st March, 2011, are given in the following table. All readers are requested to take note that the table below is just a ready reckoner for the next day's Momentum Signal values and the figures are not intended to be interpreted as any targets for the Nifty futures or indices shown therein.
Please click on the table to enlarge. For more info on the above table,  please click here.

Readers are also requested to go through The Signal, Entries and Exits, Position Limits, Risk Factors, Risk Analysis,  and FAQs pages to gain a reasonable understanding of the trading system. Please do post your  comments and suggestions on how new  posts can be made more useful.
Cheers and Prosperous Investing and Trading !!!

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Kalpesh maniar said...


Markets seems to be wanting to go down, the closing of today is a dangerous sign and we might soon see sell-off that would be scary. visit www.kalpeshmaniar.com for accurate analysis

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