Friday, February 10, 2012

EOD Analysis For 10th February 2012 and Outlook For 13th February 2012

First things first, I had mentioned last month that 2 consecutive weekly closes above 5250 will imply inherent strength on Nifty at least until Diwali 2012. That has been confirmed today and hence until proved otherwise, 4531 was indeed the bottom for the medium term [unless proved otherwise]. Corrections will come in and they will be healthy but even a fierce downmove will at the most plug the gaps created from 20th Dec and that too should be reviewed only after a close below 4880. Going below 4580 is an extremely low probability outcome now.

In 2011, Nifty spent almost 50 trading sessions in the trading range 5408-5532 and over 75 sessions if we broaden the range to 5200-5700. Similar price action can be expected in 2012 also as a lot of gains have already come in from the lows of 20th Dec '11; For now, the rally has moved too much too fast [almost 900 points in 7 weeks and the appreciation in a lot of stocks has been anywhere between 25% and 60%]

As we keep saying, there is no perpetual rise or fall - we cannot fight the ticker regardless of personal biases. From an investment perspective, again would like to reiterate that infrastructure related stocks have found their bottom - of course now they are over-heated and one should wait for the correction to buy into them

Banking stocks again have rosen remarkably but there are some head-winds pending and one should wait for a correction to buy into them. IT stocks have lots of headwinds pending and this sector should be avoided at best for 2012 in terms of fresh longs. The best bets will continue to be the index based ETFs directly like NiftyBees, BankBees and HangSengBees on dips as they automatically take care of a lot of diversification. That is all from a fundamental perspective for Nifty and major stocks.

Now for the trading levels and outlook - they remain unchanged from previous posts. OI in Nifty futures again half a milllion up from yesterday to 30.5 million today and VIX a shade hovering around 24; again reiterating these volumes are enough to take Nifty on upside to 5440-5480 levels as well as 5225-5250 levels on the downside - direction is still unclear [could be profit booking or consolidation for another leg up]

We are now 9 sessions away from Feb expiry and some fireworks are expected on either side. From a trading perspective, taking hedged positions are better.

Even the Greece impasse has apparently not created any major triggers for falls on global markets so far - thanks to central bankers who have thrusted in a lot of liquidity into the system and keeping bulls calm for now [when and how that will change - nobody knows]

Next Update for Nifty: Monday EOD

General Updates For Academic Interest
Over the weekend, I will be posting a couple of articles for academic interest only with regards to Central Bank actions and the way our lives are being wrecked by governments and some fundamentals of India.

Enjoy your weekend.

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