The
State of the Markets as on today and Where are they heading?
Indian Stock Markets, Nifty, Sensex Future in Next 12
months:
We saw NIFTY touching 6111.80
on 29 Jan 2013, which was almost 2 year high for Indian Stock Markets.
As we had explained how the
markets can rise in coming months in our last article of September 2012, the
market almost behaved in the anticipated fashion.
(Please read the
article at below link giving
explanation with charts. Also find how we predicted a US Stock Markets present
bull run)
We will, in this article
discuss what could be the course of the Indian Stock Markets in the coming
months. We will also give a short commentary on global markets which comprises
of US, Europe and Asian markets other than India.
THE
PRESENT STATUS:
The markets behaved haywire in
January and gave hopes of a new year long and more bull run by making almost
more than 2 year highs.
However, came the Budget in
February and the markets began to shiver even ahead of the Budget. The RBI
policy was only an addition in the strength that the bears were gathering up
for a sell off.
We had already seen support
levels breaching during the previous sell off from 5800 to 5500 during
November. All in all the wise knew that the markets were not worth trusting
then and neither now.
The banking, Auto, Pharma and
FMCG are not any more making new highs. In fact among this 4 Ace, Auto has
started to shiver giving correction we have not seen in years, backed by strong
negative fundamental newsflow. The banking got battered badly after the RBI
policy announcement. However, the wise already knew that banking will get a hit
once the fact that the interest rate cycle has peaked is digested among
professional trader and investor class. Also, the new competition that is going
ahead due to new banking licenses, made investors get the clue that banking is
a good sell for now and buy later after you see what happens. The Pharma and
FMCG remained strong all along, while it did not pushed the indices down, it did
not help them gain either.
As on date (2 April 2013) we
have seen good pull back in banking sector; however the autos are likely to
correct further before it could suggest that they have not been disgraced from
the 4Ace list.
It sector has shown stellar
performance in last 12 months. TeCHM, HCLTECH, and TCS were the stocks in which
wise guys earned maximum remaining long in markets in a list of ‘tradable’
rising stock of about 50! Wise guys have
another IT stock in their buy lis to gain and that is Wipro.
Steel sector and metal was
never so weak in the last few years. It can fall further before making a
bottom, however it will make a bottom fast.
SECTOR
WISE OUTLOOK FOR MAIN SECTORS: (Note: short term is 4-12
weeks, midterm is 12-24-48 weeks, long term is over and above them within
52-104 weeks) (‘Neutral’ mainly means flat to negative or flat to positive, or
highly uncertain at this point)
Banking: Negative in short
term, neutral in mid term, positive in long term.
Auto: Negative in short term,
negative in mid term, neutral in long term.
IT: Positive in short term,
positive in mid term,positive in long term.
FMGC: Neutral in short term,
positive in mid term, neutral in long term. (We include gems and jewellery
retailer in fmcg)
Pharma: Neutral in short term,
positive in mid term, neutral in long term)
Cement: neutral in short term,
negative in mid term, positive in long term.
Metals-all: Negative in short
term, negative in mid term, neutral in long term.
Power and CG: Negative in short
term, neutral in mid term, negative in long term.
Oil and Gas: Positive in short
term, positive in midterm, neutral in long term.
Financial: Negative in short
term, positive in midterm, neutral in long term.
NIFTY
TECHNICALS:
3 Perils for Nifty (Please see chart)
Before going ahead and read, we assume you have read our earlier
article giving the possible chart formation in Nifty from September 2012, which
almost has formed in that fashion. In that we have argued a multiple inverse
head and shoulder pattern for markets spanning over more than 2 years. As said by us, according to formation markets
should have or must cross the high of
6340 made at the beginning of the pattern and then form a new life high
above 6360 life time high in February or March, or by April i.e. this very
running month.
However, after the Budget, the markets went down and distorted the
formation to a danger. Only a miracle
can make Nifty rise above 6340 from present 5750 levels.
So, our technical analysts first came to conclusion that if the
markets don’t cross this 6340 in at max 1-2 month, then markets can plunge by
more than 1000 points (Nifty) in 1 year itself .
However, later on our technical analyst team after a brainstorming
came up with idea that the market still had chance to make new high in next 12
months by forming a new pattern; so what it could not made it in next 1-2
months.
The NEW CUP AND HANDLE PATTERN IS
THE ONLY SAVIOUR OF THE MARKET, BY WHICH MARKET CAN RISE TO NEW HIGH IN NEXT 12
MONTHS. (SEE CHART)
IN MARKETS WE TRY TO PREDICT CHART FORMATION ON THE BASIS OF
FORTHCOMING MARKET EVENTS AND RECIPROCALLY TRY TO IMAGINE NEWSEVENTS ON THE
BASIS OF POSSIBLE CHART FORMATION AND TRY TO SET THE TWO UP TOGETHER.
You may say that the central Government election in next 12
months/end of 12 months can be the trigger to a new high (or even fall
immediately after making new high or achieving 6300+) HOWEVER, IT SHOULD
BE NOTED THAT THE MARKETS SHOULD NOT GO BELOW 5000, SO BY THIS YOU UNDERSTAND
THE LOW THAT THE ‘HANDLE’ FORMATION CAN TOUCH IS AROUND 5000.
(note:
Technical analysis enthusiast please note that long-term technical chart
reading in not much in fashion and practice, but we have gotten tremendous
result out of it. Also note that the nifty cup and handle formation can be
viewed better in monthly charts), we have tried to put possible formation in
weekly duration)
1. Gap up open gap on 2 Jan, 2012 between 4645.95 and 4675.80:
Impact high and determinant:
As per Gap open technical peril
to the security, this 30 point gap is important technical aspect and this
should fill itself.
Fortunately, another gap at
5440 might have arrived on 13 Sep 2012, meaning Nifty would definitely have
come to this level, had not the violent move on 5 Oct, 12 occurred and filled
the gap on charts. However, violent we consider it as a genuine gap filling.
Technical Analysis and chart reading involves discretion and subjectivity. We
will, however, keep the gap in mind and that it was filled with the violent
intraday move.
2. Head and Shoulder Pattern for the short term: Impact high but medium
term. (See chart ‘Nifty Peril-2)
Read below,
3. Double Top breached already, and double bottom not happening: (See chart ‘Nifty Peril 3)
its bewildering because the
double top is exact, as you can see in chart Nifty high is 5971 on 20/02/2013
and n 11/03/2013 also it made high of 5971.20, making a difference of only 0.20
point, so this pattern is rock solid, however, its impact can be only short
term as the difference between two tops in terms of days is only 1 month. And
we can also say that if Nifty rises above the double top level and firms up
above it then it will gain significant strength.
Also, then, the head and
shoulder pattern will nullify itself and Nifty will be out of danger from h and
s pattern peril.
4. Bearish Grave stone doji pattern in monthly chart:
Please enlarge the below chart to view...
Please enlarge the below chart to view...
MARKET
EVENTS THAT CAN TRIGGER THE ‘NIFTY PERILS’ AND OTHER ESTIMATED MARKET MOVES:
Presently there is no news from
USA, except that it is recovering and US markets are gung ho, making new highs
(read here how we clearly told that US markets will rise and also showed the
chart pattern formation as well) and the things are so negative that they are
not expected to go any worst, excepting that the unwarranted speculation of
bears that the FED will start to tighten interest rates, which is far far from
any indication made by FED so far!
The Asian markets are on a
steroid rally. Most markets are on what we call ‘confused rally’. Japan is
rallying because of yet devaluation and huge bureaucratic and governmental
shift of mentality towards the economy by new regime and new men at policy
institutions. Thus, there is nothing forceful from Asia which could take market
down or up.
The situation of North Korea
warning for war is indeed serious. This can become ‘the reason’ markets may
want to crash. However, earlier also many times, the ‘tensions’ have risen to
high temperatures between North Korea and South Korea/US duo, but receded for
good later on. Nobody wants a war now when the economic situation is fragile
all over the world, and especially when everybody has the atom bomb.
The real danger can come from
Europe, it is the worst part of world to hear exciting news about financial
markets. One by one, each small country is falling apart and the EU gives them
bailout, but how long this will work, a decade also and 1 year also. If we see
a bank run type situation and across the board financial markets sell off with
bad political news turnouts such as Angela Merkel losing the German Chancellor
positions and so on; then markets will not need more negative news to go way
down if they want to.
Now, turning to the main playing field, that
is India itself, we have biggest event coming ahead i.e. central government
election in next 12 months.
We will see high volatility
(alas, says traders who have thirsted for good regular movements for last 2
years!) and we may as explained above see markets reaching to 6120 level in
next 12 months to give cup and handle formation break out and then breaching
6340, which is the life time high for our markets.
Remember our markets may be
pricey but they are not bubble.
The markets can also react to
downward pressure when it has to due to mostly bad economic figures which is
becoming a trend since last 4-8 quarters in India; including inflation number,
balance of payments/CAD figures, fiscal deficit issue and so on.
The market also, has risk of,
as already said earlier, an earlier election in first part of H2 of this
calendar year. However this is not much anticipated by us and wise people in
the market and polity.
So, thus this also clarifies that
if the market has to go down below 5000 and not make a cup and handle pattern
then it can slip up to at least 4500. Then as you know now, which domestic as
well as international factors/newsflow/even development could become the
culprit.
We will update further on this
if necessary.
Meanwhile if you are a trader or investor then you can
choose suitable advisory service from our variety of services for traders and
investors in Indian stock and commodity markets.
Please click below for the same,
Technical analysis and stock movements as well recommendations are subject to changes in market condition and news flow of company and the economy. So please remain updated with us. Or contact us directly in case of any query on info@meghainvestments.com or 09377008708
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