Where are market heading as on 25 September 2012?

As on 25 Sep 2012

Government’s Capitalist announcements buoy markets. Sensex rises to 14 months high.

New high most possible by the end of this year. Europe and China only threats to markets.

·         Higher levels expected in markets due to more economic reformist announcements are expected. Nifty chart also supports further rally by highly reliable inverted head and shoulder pattern.

·         Markets focus glued on domestic developments. Markets from USA supportive for rally, while Europe continues to languish and distract. China markets poses threats of renewed concerns of economic slump there if shanghai composite index falls below 2000 after underperforming for several years. If Indian markets absorb such occurrence, then we can continue growth of Indian stock market on strength of domestic factors.

·         We have already recommended one broadcasting stock, while we will recommend stock from retail sector and power sector very soon. We have never advised investment into aviation sector and never will.

·         Nifty has left gap up open gaps at 5260 and 5450, he it will definitely come to these levels as a correction measure, otherwise markets are looking extremely bullish on all the parameters as of now.

·         Indian markets are fundamentally trading cheap on a standalone basis (without comparison to other world stock markets). Sensex trading at 14-15 PE for 2014 forward earnings is not expensive when recession stricken USA and European market are trading even higher valuations. (Though many European countries saving their markets from big selling by banning short selling of shares) However, many consumer, fmcg, pharma, cement stocks are overvalued. Investment also not advisable in metals stocks which have not corrected. Keep booking profit when you trade in midcap stocks with high volatility.

·         The introduction of MCX STOCK EXCHANGE and RAJIV GANDHI EQUITY SCHEME will act as a major catalyst for the growth of Indian Stock Markets in this decade (2011-2020) after previous decade’s (2001-2010) catalyst of RELIANCE GROUP and advent of NSE in the further previous decade (1991-2000).

·         Indian rupee expected to continue its downside against US dollar and lean towards 60 levels after stabilizing around 55 absorbing the equity and debt market investments in the wake of government’s reformist announcements. So IT sector can continue to outperform.

·         ATTACHMENTS: (1) Nifty spot index chart midterm (2) Nifty spot index chart from 2006. (Find important commentary inside the charts images)

Dear members, In the last two weeks a lot of things happened which were highly impactful on the Indian economy and business in terms of immediate nature as well the long term future of the country’s businesses.

The government, which was hitherto slammed as sitting duck government and a government which many times went on back foot on its attempts to decrease fiscal deficit by decreasing subsidies via increasing prices of fuels; had come on front foot with surprisingly aggressive attitude and announced a slew of  so called economic reforms.

Among the announcements which buoyed the markets and pushed the sensex almost 1500 points into the stratosphere in merely 2 weeks were price rise measures and FDI clearances. Below is brief detail of announcements,

·         FDI in multi brand retail of 49% approved, and now circular also out

·         FDI in broadcasting of 74% approved, as well circular also issued now

·         FDI of 49% approved in civil aviation sector

·         Cut in subsidized LPG Cylinder distribution

·         Inclusion of ETFs and Mutual Funds in Rajiv Gandhi Equity Savings Scheme (which is aimed at exposing the middle and lower middle class population to equity markets by giving tax cuts). Detailed circular will be announced in 2 weeks.

Threats to market rally:

At present the only threats to markets is the already worsened and not recovering debt crisis in Euro zone especially in Spain, Greece and Italy. However, the increasing inclination of Germany to lean towards more liberal bail out programs is a promising factor for the debt crisis struck countries to avoid dipping into further trouble. However, elections and such other important events will mark high volatility in Euro zone countries’ markets and shape the persisting Euro zone debt woes.

Below are some of the important events in Euro zone in coming years:

SOME IMPORTANT MAJOR EVENTS AHEAD IN EURO ZONE
DATE	EVENT
Apr-13	ITALIAN PARLIAMENTARY ELECTION
SEPT/OCT 2013	GERMAL BUNDESTAG ELECTION
END 2013	IRISH PROGRAMME ENDS
MID 2014	PORTUGUESE PROGRAMME ENDS
END 2014	GREEK EU/ECB PROGRAMME ENDS
EARLY 2016	GREEK IMF PROGRAMME ENDS

China slowdown threats:

Although China has rubbed off quite a few slow down expectations in past 2 decades, this time it looks like the export led manufacturing and infrastructure oriented economy of China is in for serious deceleration in economic figures. After many years of almost 10% GDP growth rate, China has started to show signs of wearing off, as the exports numbers, the key economic figures, recently started divergent trends. However, only consistent decline in export surplus can only be seen as a threat otherwise Chinese economy should not be much worried upon for India specific purposes as the China-problem has more orientation towards USA and mainly Europe where China has stronger trade ties. India could only feel the possible ripple effect or domino effect if any major detraction should occur in these trade spheres in terms of volume dynamics between them. The cause of worry for the slowdown fear coming alive is the behavior of Chinese stock markets, which have been performing worst since the 2008 subprime crisis, even as the developed markets have started to reach pre-2008 levels and most of emerging markets have already touched 2008 highs. The Chinese stock market benchmark SCI has not since loitered even near to its peak of 6000 and languished about 50% lower level for most of the time while threatening to break 2000 presently, which could most likely to occur, although we have seen that most emerging markets like India have touched its pre 2008 highs, thanks to Index management by local bourses like NSE and BSE, in that they remove underperforming stocks from benchmark indices and add strong and outperforming stocks.

Read out recent analysis on USA markets on below link,

http://www.meghainvestments.blogspot.in/2012/01/dow-jones-analysisnew-high-possible-in.html

DISCLAIMER: Technical analysis and fundamental analysis is as on date, and subject to change as per the changes in economic conditions and market movements. Please remain updated with us.