Short term correction can give medium term buying opportunity - 20th October 2010

There is an old saying that "People have Short Memories". After all the gung-ho on Indian economy in 2007, the next two years just saw the opposite before another reversal happened and markets climbed to their all time high. But has the time to book profits have actually come???

Honestly, the answer is "No". No doubt markets have corrected in the last two weeks and why not?? After tremendous rally in the market in September, its time to book some profits and take money out of the table. But that doesn't mean that rally has ended... It is just an intermediary phase. So bulls hang on a bit before you can throw your towel in the ring...

Anyways coming back to the today's market. The markets today opened flat in the morning and then escalated sharply in the afternoon after Tax collection figures appeared. But then in the last hour of the day, the markets again corrected and closed down around 1% down. The volatility has not increased much which indicates that correction may likely to continue for a while.

The provisional figures released by exchanges indicated buying by Foreign Institutional Investors (FII) by around 120 Crores and Domestic Institutions by around 200 Crores. Though Dow Jones has opened in red trading around 1% down on account of China curbs.

China curbs will likely to affect Indian equities in a positive way as Chinese market will now become less attractive for equity investments and hence, will now divert more money into the Indian markets allocated for Asia by Foreign funds.

Tomorrow markets are likely to open in Red. The support zone for Nifty Spot is around 5980-5990 where one may buy Nifty futures with Stop-loss @ 5960 and target price range of 6070. In case Nifty Spot breaches 5960, then we may sell Nifty with Stop-loss @ 6000 and target price range of 5890.

One may also buy Bank Nifty if is trades in 12080-12100 range tomorrow morning with Stop-loss @ 12030 and target price range of 12380.

Wishing you a great trading day tomorrow!!!

Liquidity defying fundamental issues in Indian stocks Market, trend dangerous - 13th August 2010

Indian Equity Markets had a volatile session on Thursday as markets try to balance it out between adverse global cues and renewed optimism in Indian companies after Tata Motors and SBI results lately. The markets opened weak on account of overnight weak closing in US markets, but consolidated at the lower levels and gradually recovered to close flat. The Industrial Production data for June came lower @ 7% against 14% on m-o-m basis, but ably covered by steller results by SBI which posted growth of 25% on y--y basis.

Among the sectors, Banking sector did pretty well on account of good SBI results. Stocks like PNB, Axis Bank too rallied alongside SBI which helped the benchmark indices recovered as weightage of banking stocks in the indices is quite high.

Fundamentally, stocks markets have few concerns which they need to overcome. The most important one is weak global cues. US and European economies are again facing the headwinds. The unemployment numbers, trade deficit data are indicating that growth has still not picked up in these ecoomies.These will surely impact the profitability of Indian companies as well, especially in Information Technology, Textiles, Oil & Gas sectors.

Another cause of concern is Inflation. Earlier the blame game was put on Food items which were called expensive due to weak monsoon last year. But the data in the last few months have indicated that it has now spread to non-food items as well. The steep slash in benchmark rates last year, though has propped up growth but also increase the inflation as well. Now central bank is hking the benchmark rates and that will surely going to hit the profitability of India companies as interest rates increase.

Technically, markets are already trading at almost all time high PE valuations of 20-21 times. The global and domestic level concerns do not justify such high valuations. The only suporting factor is the high amount of liquidity in the equities world due to almost zero benchmark rates overseas. It is causing immense speculation in the markets due to which we are seeing markets scaling new highs despite the fundamental concerns.

Henceforth, we advise clients to stay put from the markets for a while and keep themselves in cash by atleast 30%. Also one must trade with strict stop-losses and target levels to keep its books running.

Technically Nifty is trading in a narrow range throughout this month. Traders are advised to maintain "Sell on Rise" strategy till the time Nifty breaches 5470. Hence, one may sell Nifty @ 5425-5435 range with stop loss @ 5470 and target price of 5350. In case, Nifty breaches 5470, one may go long on Nifty with target price of 5525 and Stop-loss @ 5435.

Wishing you a great trading day today!!

Rich valuations of Indian equities likely to bring more pain than global equities, caution advised - 12th August 2010

Indian Equity Markets had a weak opening on Wednesday, following the weak outlook by Federal Reserve. The rich valuations of Indian stocks are making it further more attractive to sell. The stocks remained in pressure throughout the day and finally closing the day down around 1%.

Among the sectors, almost every consumption and investment related stocks fell. Commodity stocks like Sterlite, Tata Steel fell. Construction and Infrastructure and related stocks like IDFC, Unitech, HDFC too fell putting more pressure on Indices.

US markets have too opened weak on account of negative Fed Outlook, slowdown in Chinese economy and weak economic data today. Dow Jones is currently trading 200 points low and we will most likely to have weak opening on Indian bourses tomorrow as well.

Technically, Nifty may go down till 5335-5350 where it might try to find some support. If Nifty slips below 5335, then we might see some more correction coming in which might take Nifty to 5280. Hence, traders can initially buy Nifty in 5345-5350 range with Stop-loss @ 5335 and target @ 5370. In case, Nifty breaches below 5335, then traders can go short with Stop-loss @ 5360 and target price of 5290.

Among the stocks, one may buy Cipla @ 306-309 range with Stop-loss @ 301 and target price of 321. The stock has corrected by good 15% and likely to find some good support in 305-310 range.

Wishing you a great trading day tomorrow!!!

Federal Reserve meeting likely to provide short term direction to Indian markets - 11th August 2010

After a hiatus, it feels good to come on Writing board on blogger. Thanks to blogger for providing me a personal space.

Anyways coming back to Indian Equity Markets. After breaking the crucial technical levels last week, Indian markets remained in backfoot during the first two days of the week. This seems anticipated as Indian markets look richly valued at the current levels. The earnings season has been a bit disappointing, though monsoon and other macro economic indicators are giving a positive signal. Another factor which is driving the markets has been liquidity. FIIs have been pumping continouous inflows into the Indian equities and help the markets sustain at the current levels.

Today is the critical day for the markets as US Federal Reserve will be sitting tonight to gauge the current economic scenario. It is highly probable that US Federal Reserve will announce more stimulus measure for the economy to help it tide over the current recession.

The downside tonight in US markets could trigger short term blip in Indian equities which might take benchmark index Nifty to 5350-5370 levels. If this level too gets breached, then next support only come at 5280. On the contrary if US markets overcome the initial weakness and opened flat / in green tonight, we might see Nifty heading to 5525-5540 levels in the short term. I am quite optimistic that liquidity situation should help its reach these levels.

Fundamentally, two stocks which are looking attractive at the current levels are GMR Infra and Suzlon Energy. Both the stocks have been languishing in 55-60 Rs range. Both the companies have been saddled with debt burden but are doing their bit to tide the difficult situation and can be accumulated with a long term perspective.

Wishing you a great trading day tomorrow!!!