Thursday, January 19, 2012

EOD Analysis For 19th January 2012 and Outlook For 20th January 2012

Extremely positive open on the back of global cues but volumes still pretty much unchanged. Sectoral profit booking and longs seen. Bell weather stocks like Tata Motors, Tata Steel and my barometer Banknifty all gained well; likewise for index heavy weight Reliance as well. Only CNXIT is on the back-burner right now and it is not surprising [we have always maintained that this will fall with a lead time of about 3 months]

4 sessions to go for expiry and it remains to be seen how things pan out because volumes are very critical now; morning session saw OI in Nifty futures around 28 odd million in the morning but another 2.3 odd million added towards Europe open; so volumes are coming in and one can expect this to go on until expiry as well regardless of direction.

VIX well below 23 and it does seem too sugary sweet to believe. Critical levels remain unchanged from yesterday. 5032-5092 band will be a bit difficult to conquer [unless there is a gap-up or volumes do come in further with the rise] Unless Banknifty corrects significantly and other index heavy weights don't witness profit booking, shorts will be chopped. The longer it takes to correct and fill the pending gaps, the sharper will be the subsequent falls.

There are a lot of gaps pending and one can expect these gaps to be filled prior to end of Feb series in all likelihood [historical data from Aug '11 till date suggests that Nifty fills in all gaps in either direction within a maximum period of 5 weeks; gap-ups started in current series from 10th Jan '12]

Other Updates:
Too much noise around what to expect on Greece; my personal take is simple and straightforward on that; markets are very much aware that Greece is insolvent and can't repay its debt for the next 2 decades - period! This factor will take all markets down and only the severity will be a question

Scenario 1] Credit Default Swaps are triggered, it will be the next Lehman episode in the making as along with sovereign insolvency, it will make a lot of banks and fund houses insolvent as well!

Scenario 2] If it is a write-down on Net Present Value of holdings [already down by 50%], the impact may not be as severe as some perma-bears are thinking.

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