Markets are doing great and everyday we are hearing “top” made stories ,, which I again say is a distant dream . But this post is not related to the broader markets but the Tyre sector . And to be noted here market runs on two factors :- fundamentals and perception of those fundamentals (sometimes euphoria and sometimes panic ). And for shorter terms prices are influenced by the perception .
That perception for Tyres Industries is going to be very very positive . The factors : rubber prices have topped , crude is not running away– this on the cost side. On the demand side I am seeing auto industry doing great and in coming days will be doing greater .
Without elaborating so much I have told in nutshell why should the Tyres shine bright . Now combining the Fundamentals with the perception of fundamentals and with my experience on what to expect because of that I strongly see 50% plus upside in Tyre stocks by Nov-Dec when traditionally auto sales start decelerating.
To be specific MRF(cmp 33800)–it’s my favorite , CEAT(cmp 864) and JKTyre (cmp 89) is must have for the coming months and expected levels should be MRF: 44000-55000 ,, CEAT 1260-1400,, JKTyre 140-160 before Nov-Dec 2016(lol I am mentioning year for there to be no confusion).
And I must mention here like Maruti post which was posted in Sep 2014 these targets are for traders for Investors CEAT and JKTyre can be the kind of stocks one dreams to have in portfolio with 5-10x kind of returns in coming years as any fool can be negative on Auto sector of India which is growing at fastest pace (currently at no 5 in the world which I expect to come to no 3 very soon).
Tomorrow British public will vote for/against Brexit. But I strongly feel it will vote in favour of Brexit. What is going to be impact on “economies” of the world or for that matter to India is a subject of big buzz these days . But in nutshell my opinion is it’s going to make difference to Britain most(my opinion is negatively) and for the rest of the world its going to be non-event, apart for a few jitters in world market.
Markets going exactly as per my last blog post (http://valuecm.com/blog/2016/03/05/my-market-outlook-buy-any-shit-you-will-make-moneymay-be-more-may-be-less/ ) since the feb end lows of the market. And these are the opportunities(if it happens) for fresh/re-entries.
To be short and precise I expect a decent dip (not a crash) immediately after the outcome of the referendum . And I would love to see that to have a quick gains in the bigger cycle mentioned in my last blog post(link above) . Index wise following should be the strategy and I expect it to happen:
In the panic (if what I have judged about the outcome of referendum is right) NIFTY should test 7950-7880 (today’s closing is 8270) kind of levels and buying around those levels can immediately give retracement to 8200 and further up to 8600 in very short term. So if get that chance that will be a boon to those “left outs” to have a good entry point.
Bank NIFTY can be a mint tool in the above said scenario and can test sub 17000 levels(today’s closing 17892) and 17000-17100 can be a good entry point for immediate retracement to 17800 and further up to 18400-19200-19800-20400 in very short term.
Dow jones being more mature can see 17400(today’s close 18011) and will be good to buy in 17400-17500 levels for immediate retrenchment to 18000 and further rise to 18600-19400 in very short term
Though I am lazy to post a lot will try to keep posting on twitter (@valuecm) and as always persons in contact will keep getting stock specific ideas with real-time trade positions and index updates .
Finally this will be a good time to make a killing in options.
We have a saying that markets are ahead of fundamentals. Some people see it as markets know what’s ahead and take shape according to that. But in fact markets shape the fundamentals(and off course technicals –I don’t know how its technical as charts are drawings and drawing is an art and art is mostly creative imagination-irony ) in modern economy. AS A MOST IMPORTANT POINT I MUST REMIND – THIS WHOLE ECONOMIC SYSTEM IS A “MITHYA(HINDI)”- most of people don’t know this and those who know also deliberately disagree to it. And markets (mostly stock market) decides the fate of this whole world myth economy, it affects all even those who are neither investor nor a trader of this market. But I am not going to discuss how it is , but will discuss how to be with it and how to make money(absolutely money is a myth but let’s make max of it).
A small Example : XYZ company is in very bad position right now due to heavy debt and is under huge pressure as its not able to get further debts and due to market condition profits are minuscule compared to what they were when they borrowed. Suddenly “markets” get excited due to a “trigger” ; share prices of companies rise some big some small together with this xyz. Now this XYZ will have option to borrow more and since system has more money due to “market conditions” its profit will also rise . Soon they will be able to get money from public offers instead of debt. Old debts repaid . And this growth cycle will continue till the next doom. And by the next doom this XYZ will be much bigger than the earlier doom. And this cycle will continue forever ,maybe XYZ will be bust and replaced by ABC but the whole financial system will always be expanding as our galaxy till the final doomsday.
Now we come to our markets NSE and BSE ,as neither I will discuss those things in details as it will fill books nor you will be interested in that “shit”. Markets has “cycles” and every major market will have its turn . For Indian markets we have begun very late and so major cycles are yet to come. If anyone have correlative analysis (you can name it Elliot wave or something like that) they can see we are at base even if you start counting all the gains Sensex has from the day it started. And Cycle wise every cycle has given more no of times retun than the previous cycle and in the beginning of those cycles itself people see those returns so exorbitant that they can’t stay with it till the end and once they exit market goes such up they can’t re-enter waiting for that gap between their sell and cmp to become negative, 0 , or minimal ,, off course they can’t control their urge to enter again at top. I am not talking of micro-moves where p/l continues but the macro moves. The last cycle was 2002-2007 . Can’t write much because of me being typo-lazy but we are in the second cycle which has just started AND I WILL NOT BE SURPRISED IF INDEX RALLIES 80% FROM LOWS IN NOT MORE THAN 240 DAYS . What will happen to P/E and fundamentals ,, it will be “corrected” in the way of above example and what about economy –again it will correct itself upwards the same way till the time we enter an euphoric phase .
Now “will the rally last at 80% -absolutely no” it will start the rally which in the next leg will give 300-500% from there and then the final leg with 100% from there. So if I say NIFTY will be at xxx level 5 years down the line it will be a laughable target ,but it will and will be in 6 figures.
Now little micro-time frame wise and for traders : those who are feeling left out in the current run-up – no you are not left out in fact we have done nothing compared to what’s coming up – Board the bus enjoy the ride.
Today’s Close: 8097 All time High: 9119.20 52 Week Low: 6638.55 Down from All time High: 11.2% Up from 52 week low: 21.96%
My last detailed outlook was on 16th September 2014 NIFTY was 7932.9 – my wordings were “greed is good and its time to be greedy” from then NIFTY made high 9119.2 on 4th March i.e. less than 6 months which is 15% with all twists and turns being updated on twitter and more frequently to subscribers.
In all NIFTY points made during period:
Sep-Dec – 600 points positional 1000 points squeezes
Jan-Apr- 1600 points positional 1500 points squeezes
Net : 4700 points in 6 months which is 780 points per month !!
Moving forward today will be the bottom out day , precise buying commentary on twitter during the day.
Market outlook : NIFTY 8650-8840-9228-9400
Disclaimer : Our blog, twitter are only my views and are never an investment advice.