Winning Strokes
Anyway, the much expected correction might have come at last. The key indices have been moving up, without much fundamental backing.
The P/E of Nifty is now ~41.50, and hence the odds are in favour of the bears.
During the writing of this report the BSE Sensex is seen trading at 52,107.54 down 77.37 points (-0.09%), while Nifty50 was seen at 15,311.55 down 10.65 points (-0.02%).
In the short term the Nifty might test 14470 on the downside.
The markets moved up when NaMo sympathetic business channels like Zee Business, riased the bogey of expansionary budget for FY22.
But according to a recently published media report, former RBI Deputy Governor, Dr. Rakesh Mohan said:
"The Budget is highly constrained in the expenditure side also, with committed expenditures on salaries, pensions, defence, and subsidies.
The main feature of the current Budget is the proposed increase in capital expenditure from 1.7% in 2019-2020 to the proposed 2.5% in 2021-2022".
The expansion is meagre and it doesn't say how the infra - projects will be fast tracked or how the government will deal with the increasing CAD which will arise due to a push in the crude oil prices in the international market.
Also, this expansion will take place if and only if the the revenue stream of the NDA government gets boosted. Looking at the current state of affairs it doesn't look too much plausible to give it a noticeable upward push.
This exposes the raw bluffs of the vested operators for Jacking the markets up. Not only this let us take other fundamental points too, from Dr. Mohan's interview:
#The gross central tax revenue has been stagnant as a proportion to GDP for more than a decade.
#The gross tax revenue was 12% in 2007-2008, and has been around 10%-11% of GDP ever since. And in the year 2019-2020, the year before the pandemic, it was less than 10%.
#This fiscal we need to see how much government can garner by selling the PSU shares, considering that the last year was an watershed.
#The iron Ore prices have been moving up, but Ironically there is no let up in the price esclation of the steel shares.
Similar, is the case of the continuous rise in prices of the auto shares when the train and air transport has opened up or is slowly opening up.
#The banking shares have been moving up on the news of setting up of a Bad Bank, but there is no mention, of, who will do the cleaning part or at how much hair cut the toxic assets of the banks will be handed over to the ARCs. If it is less than 50%, then it brings us to the same old devil into the balance sheets of the NPA loaded banks. These factors does not augur well for an economic prowess.
#The P/E of Nifty should ideally be around 18/22 levels, but it is almost twice.
All this reinforces the belief in correction of Nifty.
Another point: Motilal Oswal Financial Services, a brokerage house known to be sumpathetic to Narendra Modi and his brand of the BJP, recently said:
"There has been a 3.9 percent/2 percent upgrade in FY21/FY22E Nifty EPS estimates to Rs.536/Rs.713 (from Rs.516/Rs.699). We are now building in Nifty EPS growth of 15 percent for FY21E".
At an EPS of Rs.359.20, the P/E of Nifty is at 41.59. However, even at an EPS of Rs.536, the P/E of Nifty comes at 28.58, from which levels or from where the domestic markets have corrected historically.
So, a correction is in offing in the due course. The markets are probably being jacked up before Bengal elections by the vested groups to give a feel good factor.
#Sell the shares of Tata Motors Ltd at Rs.330.70, for short term target of Rs.280. SL: Rs.370.
#By the way my CROREPATI scheme has started and I hope in future we will be able to see CROREPATIs coming up, from its boxes.
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