Sunday, October 23, 2011

Global Markets Update - Special Coverage For Indian Bourses 22nd October 2011

As mentioned earlier as well, let us not forget that the market has moved no where from 26th Aug till date; we have been oscillating in the broad range of 4700-5100 levels with a lot of gap-ups and gap-downs and as explained in the previous part, it is a game of futures and options that is being played - simple. The only good part is that we are almost on the verge of finding a bottom as far as Nifty is concerned; 4450-4550 is almost certain to be tested in November [please refer harshal's weavologic section for the Fibo logic and Raghuji's section for the Wavologic] and fundamentally we can't get worse than where we are.

Our per capita GDP is still well below USD 1250 per annum and even with the western world's slowdown, their per capita GDP continues to remain far above our levels. The real problem for India is that despite the impact of Euro and Dollar going down amongst some of the other major currencies, the Indian rupee is simply refusing to go below and this has far more negative consequences than positive consequences. Here, would like to pat the team on the back that the 'Sell Warning Triggers' from FIIs were sounded when the Rollar convincingly breached past the 46-47 mark before any media channel could catch it and make it headlines towards 48-49 [thanks to the 'breaking news' by media, most of the damage was already done by then and we had melted from 5600 levels to 4800 levels within 12 odd trading sessions; this also vindicated our stance that charts are supreme and news simply follow in most of the cases]

So let the hot money and big punters take Nifty as high as they want to - expiry manipulation and mahurat trading are coming very close to each other this time. We are near certain that 16th November to 22nd November is going to be a very turbulent period with a lot of downside risks and whilst I personally do outline support and resistance levels on a daily basis, personally am sticking on to cash and waiting for the correction to take place as far as largecaps and NiftyBees, BankBees etc are concerned. In the worst case scenario, either in November or towards the end of the Indian fiscal year in March, there is one risk of retesting 4200-3800 levels [odds are very low for these levels] but since the worst is already factored in, India will be one of the first countries to emerge from the financial mess. We should be able to see a new high on Nifty in 2014 with the election fever [and it does not depend on which party wins the elections] and most of the upside will be captured in 2012-2013 [just as it happened in 2009-2010] Some mid-cap counters were mentioned last week and some more are on the horizon

So whatever capital one has, it may be prudent to start picking some Nifty Bees, BankBees, HangSeng Bees etc from the lows [levels given in last week's update] Too early to predict the bottom right now but a lot of mid-caps are almost near their bottoms; Fundamentally, I look for segments that receive regular revenue and with reasonable debt on their books. For instance GPPL, a port terminal venture is definitely worth considering IMHO - regardless of where shipping prices move, a ship has to pay for using the berth and ships will continue to be a main mode of transport for basic commodities and retail goods. On the same lines, I would also be looking at counters like GDL, All Cargo etc and pick them up from bottoms. These are freight stations with warehouses close to the port; again steady revenue flows move in because of merchandise being docked here and reworked for containerizion [or decontainerization in case of imports]. Such counters will not be able to escape the wrath of bear market conditions in the short term but provide a good value proposition if one is willing to wait for a 2 year to 3 year period.

On the same lines of logic, I would also be looking for investments in counters like PVR [given our craze for movies - count me in as well bcoz I may talk some fancy gibberish mumbo jumbo but my weekend is incomplete without some Hindi movies!] Telecom is definitely something to have in the portfolio and I am sticking to the main ones only Airtel, Idea, RCom and would pick them from the lows next month. As I always keep saying, to structure a portfolio, one need not have too many counters and as middle class people, our investment capacities are also limited. I look for about 8 to 10 counters and then straightaway move on to the indices.

So to recap action for those who trade, crucial levels for Nifty are as follows

A close above 5150 can give upto 144 points in the same direction filling up that pending upside gap towards 5328; weakness to be only confirmed with a close below 4880 that will give upto another 144 points in the same direction filling up the gap of 4750-4880. Play safe, keep hedges intact and don't read too much into the news. As Ashu Dutt keeps reminding on his show, develop the trader's edge and that lies in the power of charts and not news.

As usual would like to put in my disclaimer - it is my first year in the market and have a lot of things to learn still. I have been lucky to be under seniors like wwji, raghuji, harshalji, mgusaji [all my mmb portal mentors] who kept giving me hard knocks to keep re-visiting the books and refining the analysis each day.

Recommended Books for Develeoping TA Skills
Technical Analysis by Martin Pring
Encyclopedia of Chart Patterns by Thomas Bullkowski
Elliott Wave Theorist by Robert Pretcher Jr and Alfred Frost
Futures and Options by Jonh Hull

IMHO, these 4 books are more than sufficient as far as theory is concerned; the real challenge is to comprehend these and learn the different patterns in real-time with passage of time and as per records kept at Ivy League Universities, it takes about 2 years to 3 years to be able to relate to a chart pattern in real-time without even looking at any reference book; so that shows how far behind I am in learning and hope that it is inspiration enough for some of you to read more and comprehend more.


animoitra2011 said...

Absolutely fine Nagraj ji.Regds.

nalin said...

nagraj ji....if dis is vannila dn its perfect... I luvd backgrnd n yes it loads very fast on cell. Thanx.

vineeta said...

thanks a lot for posting such informative analysis