Saturday, November 5, 2011

Global Markets Update - Special Coverage For Indian Bourses - 5th November 2011

So moving forward to Nifty, what the hell is on-going here with so many people calling 'bull-bull'; as usual, I need to start off with the disaster-led forecast I had - was looking for a new high this year on Nifty subject to 5408 levels being intact until 12th August and should that break-down, 5092-5125 levels to provide a buy-zone and we conquer 5532 by September without breaking that all the way through till October. We retested 4700-4750 zone 3 times in Aug/Sep/Oct and seem to have come back to 5100-5400 range - really; are things hunky dory again for Nifty already? Please refer the attached file that has taken Nifty in the 5100-5400 range and the spot prices of the top stocks in each major period of fall and rise this year. Blame it on my lethargy that I have only focussed on the top 20 stocks rather than the entire 50 stocks - but what has been covered here is pretty much a representative sample of the state of the market. [Need to add here that the defensive FMCG segment has been missed out and they have proved their merit in the falling market]

Being an emerging market index, Nifty will tend to move ahead of fiat currency indices in the rise and fall; The market breadth is getting pathetic with each passing month and right now, the real estate pack, IT pack and automotive pack is showing some strength - but how long can they hold when Banknifty and contenders are cracking - could be anybody's guess.

As I have mentioned, Euro-Dollar staging a close below 1.36 will seal the fate of BNF and it seems set for a retest of 8k-6.5k levels; We are almost at the bottom of the market for Nifty IMHO; as per the broader picture, I am looking for a bottom around 4550 within this month [or maybe a little more depending on the drama of Europe]. As Raghuji mentioned yesterday, we need to take it one at a time and in terms of short-term momentum, we need to wait for a breach of 5169 first, then 5032, then 4880 and then 4720; as seen, there is no perpetual rise or fall and hence taking unidirectional positions won't help.

Cash continues to be king and the small-caps and mid-caps are already badgered to a great extent and they can be accumulated slowly and steadily. Nifty Bees continue to be good investments in the spot price range 3800-4800 [I am not saying Nifty will go to 3800 but markets tend to be irrational so we need to be alert for those possibilities] Any value below 4800 on Nifty spot in current market conditions is a Buy Signal for Nifty Bees with a 2-3 year horizon of more than doubling the value. As I keep mentioning always, the key is systematic investment in tranches and like-wise for BankBees, HangSeng Bees.

Entry prices for these 3 securities to recap once again
NiftyBees - Any price below 4800 on Nifty spot (Recommend 20% of Investment outlay in 3 to 6 installments of entry)

BankBees - Any price below 9000 on BankNifty spot (Recommend 20% of Investment outlay in 3 to 6 installments of entry)

HangSengBees - Any price below 15k on Hang Seng spot (Recommend 20% of Investment outlay in 3 to 6 installments of entry)

As usual, for investments, the mantra remains buy low - sell high; avoid the IPO manias, avoid picking up sectors that do not have regular cash flows. Avoid operator driven stocks like Shri Ashta, CALS Refinery, Jubilant Foodwork, GTL, KS Oils etc etc.

Stick to the good stocks listed in the Nifty 100 stocks for best results;
For instance JP Associates is a good stock that was artificially inflated; it should be able to find a bottom in the 40-55 price band and one should pick it up in tranches at such price levels.

Other infrastructure stocks like IRB, Lanco Infra are all coming close to their bottoms now; very confident of IRB bucking upwards again in 2 years time [can say about this as I have myself seen the way the Mumbai-Pune expressway works with regular cash revenues]. Lanco, relying solely on charts and this is not a company like Koutons or Cantabil that never had a sound business model in the first place. On the same lines GVK, GMR [barring their power (mis)adventure] - the air terminal business model is absolutely sound. Both Delhi and Hyderabad airports are doing well for GMR and Mumbai and Bangalore airports are doing well for GVK. They were over-heated earlier, and now the prices reflect sanity.

On the telecom front, growth is here to stay and whilst Airtel is quoting much higher prices than warranted right now, RCom, Idea etc are almost close to their bottoms. One may wish to wait for another retest of lower levels on Nifty and pick up some on delivery basis.

As far as precious metals are concerned, there is stark divergence in price of gold and silver [I always give the price basis USD / Ounce on comex levels] This uncertainty regarding fiat currencies may show a temporary mania in gold prices but the eventual target is 1200-1400 dollars an ounce; around these levels, one can just go ahead and buy some gold bars/coins and retain them for long-term returns. Silver, being high beta is near certain to quote below USD 25 an ounce at which time one can start accumulating for the long term.

Coming back to the short-term focus, the falls are being bought into and unless we get a close below 5032 on Nifty spot [that can only surface as a probability once 5170 is broken on closing basis] and full weakness with close below 4880; until then, those interested in trading can stick to Nifty futures, open positions on both sides with a 1:1 ratio with a stop-loss of 25 points on either side and trail the winning leg.


reachnagraj / theknight16 said...

Please click 'attached file' for the spreadsheet

shriram said...

nice job nagi !