Robin Hood Budget

Here are some highlights on the Indian budget:

• For income upto Rs 1,50,000 tax liability will be nil, between Rs 1,50,000 and Rs 3,00,000 tax liability will be 10% , from 3 lakh to 5 lakh tax liability will be 20%, from 5 lakh upwards it will be 30%
• No change in surcharge of corporate tax
• 5 year tax holiday for hospitals especially in tier 2 and tier 3 cities
• Central sales tax cut from 3% to 2%
• Govt withdraws banking transaction tax
• Levy on STT only on option premiums
• Commodities transaction tax introduced like STT
• Short term capital gains to be taxed at 15% instead of the previous 10%
• STT Will be treated as an expense rather than a Tax (its worst than the Short term capital gain increase to 15% for traders)
• 5 year tax holiday to 2,3& 4 star hotels in UNESCO declared heritage site areas
• Dividend of subsidiary company will be exempt from DDT
• Duty on 2 wheelers reduced from 16 to 12%
• Excise on small cars reduced to 14%
• Excise on pharma goods slashed to 14%
• Reduce duties on steel melting scrap, aluminum scrap
• Total estimate of Farmer loans being waived is Rs. 60,000 Cr.

All in all an OK to bad budget (ok for common man & bad for stock market man), unless if you are a farmer then good for you, but the interesting thing will be to see how the money will be allocated to the Farmer loan waiver scheme cause that matter has been alluded & not even accounted for in the budget, ofcourse an easy way should be diluting stake in a few state owned companies, rather than even thinking of any further tax levy. Also the tinkering with stock markets was uncalled for & not needed after a crash of this proportion, but since it will affect the FII's in no way, the retail suffering is ignored & not that it will generate any substantial revenues for the govt. Well atleast on the bright side the long term capital gain was left untouched. So will the short term players run to book profits before before 31st March ? Which profits, all short term profit gone with the crash. So the taxes (direct & indirect) continues & so does the Robin hood budget, seems the Govt is more happy pleasing the Left rather than the public, the corporate, the money making people, hope they don't kill the goose giving the golden egg too much.

So still no bail out for the bulls with the world markets weak & budget aggravating our weakness, seems the FM has laid out seeds for a future Bear Market.

Technically we remain as is, same as posted in the "Moment of truth" below.

Moment of Truth...

Holding of 5100/5150 is important, for an immediate rally, if we break downside is pending... All world markets are in sync & having very similar pattern, waiting for some major event I guess (dont tell me its for the Indian budget, lol). People say all Asian markets were good, why we went down or something similar but if we observe all market are having a broader same moment, If we rise more on a particular day we fall more & if we dont rise like other markets we fall less, all moves are compensated. A break above 5545 is required to sooth all bull nerves. Till then we are indecisive.

A few reasons why I think 4900 / 5000 Nifty will be tested are that We need to test the falling trend line from the top, which is around those levels & also the 200 DMA + 1 down wave is pending (which seems to have begun), Also the gap may be covered at those levels which we made in this upmove, so 3 in 1 reasons. Now in this down leg if we dont break 4800, then we surely have the POWER on, but if we do, bottom is far away.

My views is the way we are making gaps on the falls, we would have a very fast upmove to 5700 / 6000 levels, but please protect your finances first, "To run away & fight another day is better than To die fighting"

Orchestra.

What a nice Orchestrated rise, Since days the positive news was blacked out & only negative news allowed. Can we imagine the coincidence that Reliance finds gas + L&T gets 311 crore order from Qatar + Gail signs MoU with Russian Company + Bhel bags contract from ONGC + Punj Lloyd gets Singapore company contract + Fuel prices hiked (for benefit of Oil companies to support the Index) + NTPC to invest 40 billion $ over next 5 years and some more companies having positive news all on the same day ??? So clear that the Orchestra was planned for today.

Break of 4803 on the downside will break the market till atleast 4448 and break of 5545 on upside will clearly indicate a firm bottom already made with a fresh rally & buy on decline signal. Sustaining above 5150 is essential for the present strength to remain. With the gaps (as mentioned before) present above I have a positive bias as they should be covered sooner or later.

Power on, Lights off...

Buyers beware stage still continues & bottom fishers & averagers are lost in levels, Well the saga of Reliance issues carries on... As our 5071 gave way so as mentioned 4850 / 4900 would be on the cards. Nifty has made a low of 4870, 4730 possible on break of 4850, levels keep coming bottom illusive. Close above 5000 is important from several aspects & otherwise still pain is on. IT pack is strong, whereas Reliance pack causing the most damage to the indices. The weekly gap in the sensex remain unfilled at 18930. Holding 16000 on the sensex is utmost crutial for the bull market trendline to survive

Media heavily playing down heavily on the Power issue in the entire weekend & creating more panic in the market than necessary, all said is nothing new, where were they when the IPO was announced or when it was being subscribed. Operators are on spree of negative news spread.

Caveat emptor

As explained yesterday "There has been a pattern since sometime, the day dow tanks we recover by end quite a bit but give up gains the next day, when the World markets are green, so enguard / Caveat emptor" which turned out to be right, We have a more severe fall today, pointwise and percentage wise. Yesterday we were down more than 200 Nifty points & closed better than that.

So the operators use Dow to play with retail psychology ? If Dow dropped 370 points and we recovered from days lows to close around 2.5% down, retail confidence was built, with a follow-up stability the next day, so you say well looks like everything's fine lets buy... & bang suddenly after 2:00 PMish operators offload whatever they bought day before to hold the markets & then panic is created.... same story usually, so I said Buyers Beware...

Well anyways the 5170 have given way & after that the fall accelerated, so now 5071 is crutial, but should remain down under 5071 to be considered not just a dip & go kindof thing, if that happens then doors will be open for sub 5000 levels, around 4850 / 4900.

Range Bound Markets

Market have been swinging in a range but 5170 should hold, its crutial, otherwise trouble on the horizon, Final stop 5071 after which darkness around, but now one more gap at 5412 Nifty which is open...

Gap down... Power on ???

Well US recession seems to be on the brink of confirmation, Asia is a sea red. 5250 held & Nifty has a hugh gap down, should be covered, after which we need to observe future direction. So to cover gap Nifty need to achieve, 5412 (yesterdays low) also the much conquered 5400 will now become again a resistance. Sustaining above 5400 from hereon is critical otherewise we may go back to test 5071, though that trendline support lies around 5150 now.

Many stocks completed their 61% retracements in this rise, but still many are yet to complete even 50% & they most probably will & are still showing strength.

Coincidently as the Reliance Power (11.2.08) listing nears, we see the similar behavior to the resilience shown by the markets before the IPO.

There has been a pattern since sometime, the day dow tanks we recover by end quite a bit but give up gains the next day, when the World markets are green, so enguard / Caveat emptor

Dull but Strong...

As mentioned yesterday that 5400 will be tested, it did the needful, infact, even yesterday a suddenly drop came & tested it. We need to spend some time here, Targets mentioned earlier,remain so.

With a weak Asia & Dow, we did perform better than most, & advance / decline were approx 2:1, which was great.

REPL listing on 11.Feb - Is this resilience for REPL's benefit, maybe so. 1st day of IPO market started crash, blocked all money, made traders sell forcefully & now they give refund after 1000 Nifty point up from the bottom, are you a buyer, well laid trap, come buy if you dare... for new buyer please remember stoploss is too deep at 5070.

Run Sensex Run...

Good to see the nice rise, since Friday, we have a definite breakout now that 5400 is out of the way, the next retracement level is 5640 & at 5700 is a gap which I have mentioned will get covered, so the setup seems good, but remember the 5400 which took its sweet time to get broken will be tested definitely in the near future... Also gap after 5700 is around 20,200 of Sensex, which too needs covering. The media guys have being yakking about 5500 levels, since the fall, which I personally dont find any interest & significance in.

As I pleaded to the Markets several times, We finally have an Awesome IT rally going on, Go IT Go, forget the $. Sectors have being changed by the operators to throw the public off, so those who were buying the Reliance's & Infra stocks, expecting them to start running on market recovery, they will run too but after enough of retail get frustrated. Balancing act....

So let's foresee a typical conversation in time to come: "Hey look at IT rise, I always knew we should have bought Software stocks" by that time usual case maybe that software rally may be peaking, "Hey lets dump the Infra / Construction stocks & get into Software, its evergreen" follow-up: "Hey whats happening IT is stagnant & coming off & now Infra started running, just my kindof Luck" Now lets not loose patience & stick to IT", After few months the vice versa conversation takes place....

Dow has been running non-stop since the bottom made, We need to make most of the sunshine & our pullbacks should coincide with Dow, since we are nearing overbought zone, but Monday bullish means bulls are on, there is always a significance of an up Monday, if you notice during corrections & crashes Mondays will usually be down days, so we need a bullish Monday.

A Mini Breakout....

Well Nifty has broken out the intraday falling trendline from 25th Jan onward, following is to be noted:

1) We need a breakout above 5400 for any bullishness, as Nifty is in a range of 5071 to 5400 (yes 5071 has been held as mentioned earlier as 3 attempts failed to break it)

2) As shown in the chart the nifty trend line falling from 25th Jan would logically be tested, if it does so on Monday, it should be around 5200.

3) So preferably we should break above 5400 on Monday opening & then test the 5200 region as we closed on a bullish note & US markets were not bad.

4) On the daily chart we have a macd crossover which is a sign markets are turning bullish.

India - Fastest growth - No / Fastest fall - Yes

Looking at the world Major Indices, we see all have fallen approx 30/35 % since their tops made. Lets compare them to see where we stand:

Indices Top Month Bottom Date

Dow 14198 Mid Oct 07 11634 Mid Jan 08
FTSE 6754/6751 Jul/Oct 07 5338 Mid Jan 08
HangSang 32000 End Oct 07 21700 Mid Jan 08
Shanghai 6124 Mid Oct 07 4330 Still not bottomed
Nikkei 18000 July 07 12572 Mid Jan 08
Aord 6873 Nov 1st week 07 5222 Mid Jan 08
Sensex 21200 Jan 14 08 15332 Jan 22 08

So on an average Most Indices took around 3 months to fall the 30/35 % & We fell the same fall in 8 trading sessions, Is this fair, Is'nt this height of Manipulation or whatever you call it. It happens only in India... Our Growth rates may not be the highest in the World but our crash / fall are the fastest.

Also note in my 1st post I had mentioned that all major correction begin from London markets, look at the FTSE, which topped in July 2007 & then double topped in Oct 07. Though it dint break the July top so I consider it topping in July.

So where is our dear Finance minister who was taking strong action as the rise of each 1000 points (which was average 10/15 days per 1000) was not good according to him & thus he banned the PN notes & took other actions, now a fall of 6000 points, should he be least bothered about it, if 1000 points rise in 10 days was worth banning PN notes, is'nt 6000 points fall worth unbanning them ???? WHERE ARE YOU MR. PC, your voters want some answers.

i don't expect anything, but the rise got FM's attention & action, the fall deserves atleast acknowledgment of some kind not ignorance... or everything's ok kindof remarks (we have or had our mothers to pat our back & say its ok, we dont require that from the FM)... supporting & siding is not ruled out... I know all this is part & partial of the game but if the FM wants to play let it atleast seem like he well played...