WEEKLY MARKET OUTLOOK
SUPPORT AT 4700/4600/4550
RESISTANCE AT 4907/4970/5050
(1) TECHNICAL ANALYSIS ARGUMENTS
Trend reversal or correction a million dollar question
11% correction so far from 5300 to 4700
Let’s paint the scenario to give answer of above question a trend reversal or correction by two way (1) technical analysis arguments (2) fundamental analysis arguments.
Last week we have given analysis with 5 different theories and one level was key which is 15300.
As long as we are holding this support level buy on dips is good strategy.
Hear with this report we have attach chart of sensex which shows index is forming “a-b-c common flat”/triangle formation on Elliott wave theory.
If sensex holds key levels of 15300 post budget then wave 3rd will start with target of 19300/19600 and this wave will be explosive in nature.
As per wave theory wave 1st made by initial traders and investors with contrarian call on market.
When the corrective wave 2nd end and wave 3rd start with breaching wave 1st this rally again catches attention of initial traders /investors who were holding long position from wave 1st and not exit on down wave 2nd at this time they become more confident about the market rise and the same time price and volume both rise at faster pace, because those who have left opportunity to enter in wave 2nd and those who have buy in wave 1st both will start entering in to market.
So technically we assume that if index holds 15300 without any bed news from budget then explosive wave 3rd to start for target of 19300/19600
Typical Elliott wave and Dow theory follower will keep stop loss of 15300 and will enter above 17500/17800 to catch the rally up to 19300/19600 levels.
(2) FUNDAMENTAL ANALYSIS ARGUMENTS
Improved indicators like industrial production, export data, quartery results indicating recovery of Indian economy.
In Indian market there are lots of money on sideline to invest post budget.
Life Insurance Corporation of India has planned to invest Rs 10000 crores by March end.
If we analyze the last quarter data of insurance company, they all together have collected nearly Rs 30000 crores, if assume all premiums will be paid by all policy holders the again this quarter Rs 30000 crores of money flow come to capital market.
Along with this we have seen net in-flow in all major mutual fund houses, which are currently staying on sideline and waiting for budget.
So there is no problem of liquidity from domestic front.
Big problem at this juncture is high fiscal deficit with rising inflation.
As per government agenda –fiscal deficit will not be a big problem because government will fetch Nearly Rs 50000 crores annually from dis-investments program.
Also there are 3G auctions underway and nearly RS 35000 crores will come in government kitty and this will help to come down fiscal deficit.
Hiking petroleum products will also help to come down fiscal deficit.
Now the second big problem is inflation.
If inflation is with the higher growth then it is good for economy, as prices of goods are rising with production with rising income levels.
Price rise due to higher and genuine demand not because of lower production, rising production of goods will translate in to GDP and income levels of households so inflation will not be a big worry.
In short run market may move according to technical levels but in the long run it move along with economy and corporate earnings.
Investments guru of world BENJAMIN GRAHAM says in short run stock market is voting machine and in the long run it is weighing machine.
We believe that there are ample opportunities available which can yield higher returns.
These have to UN covered through research and meticulous stock selection.
In such scenario active portfolio management is likely to outperform passive strategies.
In India we will have good growth under insurance sector (particular ULIP) which will pump long term money in to Indian market.
Along with insurance sector online mutual fund will also help to tap the rural and urban money vary fast in long run.
MUTUAL FUND PICK
JM MID CAP FUND-AVOID
This fund fails to deliver impressive returns and constantly underperforming its benchmark index.
CONCLUSION:
So over all both on technical and fundamental arguments we believe this is not trend reversal and just a correction and trader and investor should find out value buying in market.
BUDGET EXPECTIONS:
Increase in excise duties.
Raise the service tax rate to 12% from 10%.
Increase Central Value Added Tax (Cenvat).
Road map for the introduction of the key direct and indirect tax reforms,
(1) direct tax code (DTC)
(2) Goods & Services Tax (GST)
Three important fiscal bills,
(1) Pension Fund Regulatory and Development Authority.
(2) Insurance Bill.
(3) Banking Regulation (Amendment) Bill.
EXIT CALLS:
EXIDE IND: As per our SPECIAL TECHNICAL THEORY, this stock could crash to Rs.50.
SHRIRAM TRANSPORT: As per our SPECIAL TECHNICAL THEORY, this stock could crash to R.250.
Most of the readers following us for more than two years know HOW THE SENSEX CRASHED TO 11192, A LEVEL WE HAMMERED FOR NEARLY CLOSE TO 10 MONTHS! YES THIS WAS THE MIRACLULOUS RESULT OF OUR THIS SPECIAL TECHNICAL THEORY. WE CALL IT MIRACLE BECAUSE WE DON’T UNDERSTAND ITS FORMULA BUT THE FACT IS THAT IT WORKS.
NOT JUST THAT SEVERAL OTHER STOCK, COMMODITIES AND INTERNATIONAL INDICES INCLUDING IN CURRENCY PAIRS-WE HAVE GIVEN DOWN TARGETS AND 100% ACHIEVED, WHILE 5% OR LESS IS THE RATIO OF NON-ACHIEVEMENT.
Biggest Mistake Done By Common Investor Is…
…They Don’t Buy When Stock Market Come Down At Value Buying Levels.
…They Don’t Buy When Stock Market Come Down At Value Buying Levels.
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WORLD ECONOMY:
US Federal Bank chairman announced 0.75% rise in interest rates.
Well, this was seemingly seemed to be An Event for global economy and the USA, but the capital markets hardly behaved or responded. May be they were keeping their attention on what they believe to be much important issues like the Euro-Dollar situation on what happens with the Greece bail-out development, while cats are readying or say so, to come out or bag while it is awaited when some 4 to 5 odd countries declare themselves Greece, most from the EU pack.
According to Theory of discounting, when you believe or feel that markets are not responding as it should be to certain phenomena/news/event, then deem that it has already responded to that before the official or public issue of the same or otherwise it is going to yet respond to it. In simple language either the markets have already discounted the information or is going to do so in near future. And you are merely making the mistake of WHEN WILL IT or rather WHEN SHOULD IT. And not/beware many times for reporting industry News Doesnt make the Market BUT the Markets make the news! For example after the Budget market doesnt went down for 3 days or say 5 days, and next week the declines starts. Then from the next week all the budget comments and analysis turns unfavourable and the news industry will tell you how the budget was responsible for down market.
Anyways, we were talking about the rate hike in USA for the first time after June2006. The Emerging Economies mainly China and India had already started doing that. So is Mr. Bernanke following the developing countries. It could be a subject of study if the USA is looking at emerging economies policies to set its economy right. In this world of international finance, this seems more of a tactic and game for capital flows, forex markets and currency catch-up catch-ins, than underlied with the Real economy.
The rate hike could mean some or all of the following:
1. The US economy is in recovery shape. (note, not the world economy. I dont understand why will they care about global economy? or if someone thinks so, its a misbelief)
2. The financial system there does not need liquidity support anymore, or say need of such required support is reducing.
3. Fear of rising inflationary pressure and expectation is surfaced. (this could mean a good deal for commodities prices, if the prices of commodities are able to build a strong base around the levels where they are trading now then they may have a great run for next some years, even following subsequent rate hikes to say may be up to 3pc.
4. Economy growth rate and estimates on rise.
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