Nifty and BankNifty Daily/Weekly Charts [Will be updated over the weekend]
The strong uptrending channel from the lows of 4770 in mid-2012 until 6100 on the upside has been broken by price action on the downside. Budget sessions are usually volatile and it takes 3 to 4 days for markets to digest the budget. The breach of 5740 yesterday on closing basis which was also a monthly closing vindicates our bearish stance for 2nd half of 2013.
Since 5740 did not hold strongly [which I personally thought it would as mentioned in the previous update], the downside support now comes in the 5532-5580 zone [of which 5532 should hold strongly IMHO]
On the upside, 5880-5944 will be strong resistances.
2 consecutive closes above 5740 will confirm a minimum upside target of 5880 and 2 consecutive closes above 5944 will confirm an upside target of 6080 at least.
Critical Dates for March 2013
21st March 2013 - Spring Equinox [market is expected to take a definite direction for a move of 200-300 points in either direction in a 2 week period between 21st March '13 and 5th April '13 from closing prices of 20th/21st March 2013]
Other Economic Stuff:
Deflation is a myth and we should be rejecting deflation calls even if is from Nobel laureates like Roubini, Krugman or the active proponent of EW theory Robert Prechter. I am personally in full agreement with Nadeem Walyat's argument that Inflation and rising inflation is the result of quantitative easing measures. In every post, I will just point towards the consumption theme - if indeed headline inflation is low, why are fruits, vegetables, fuel prices etc soaring so much? Apart from the diesel price deregulation theme, the bottom line is that quantitative easing and debt monetization finds funds channelized into the most essential needs of mankind in the consumption theme. I personally don't care about what the official statistics are with regards to inflation data in India. The basket of goods was determined in late 1950s with different demographic profiles of citizens. Today that demographic profiles have changed drastically [and the same business channels take pride in declaring 'demographic dividend'!!!!] Milk, Eggs, Fuel, Education, Rents all are soaring faster than the wages [growing at about 8% PA on average]
My personal outlook regarding corporate loan restructuring has been vindicated by the announcement of the ARC setup. Now financial institutions have started engaging in buying/selling loan portfolios in the fixed income market and this is just a pre-cursor to what lies ahead. Just like the housing market bubble of US in the 2004-2007 period, we are witnessing the creation of an asset bubble destined to burst with corporate loans in India. The stock prices of banks are misleading because asset quality and toxic loans are not in the price so far. In part, the consensus opinion is that the banks will have some other party to pick up the toxic loan portfolio, thereby mitigating the risk levels of the bank. This is an absolutely wrong assumption because this assumption needs the counter-party to be solvent and with adequate capital / risk appetite. Indirectly, its a good thing as it will explode so rapidly when the trigger is pulled and provide a lower base to start things afresh. There won't be any armageddon as pointed out by economists; in the end its a zero sum game and life will go on as usual.
Coming back to the Nifty, the view remains that this is not the time to buy stocks. The buy zone is when Nifty hits 4800 levels with maximum exposure to NiftyBees, BankBees and InfraBees and in front-line stocks like LT, SBIN, ICICI Bank etc. For those looking at FMCG as a defensive bet [and indeed a lot of FMCG and Pharma stocks have doubled in the last 18 months], just take a look at what HUL is doing....In the last 3 weeks, there have been advertisements from HUL for sale of prime residential assets and the Unilever group in general is solidifying its back-office operations in Bangalore. All this is hinting towards challenges with 'spend management' and a pre-cursor that even the defensive bets will soon see a sharp selloff.
Falls, corrections are always healthy for the market as they bring in buying opportunities and create wealth at a rate faster than inflation. Whether the correction on Nifty starts now or after making a new high is unknown. But one leg of a sharp fall is inevitable before the mega-bull run slated to begin after elections 2014.
Enjoy the upsides till it lasts and patiently wait for the next buying opportunity is what I would personally advise.
New feature from March 2013: A video update along with the blog post
[Will be uploaded over the weekend]
The strong uptrending channel from the lows of 4770 in mid-2012 until 6100 on the upside has been broken by price action on the downside. Budget sessions are usually volatile and it takes 3 to 4 days for markets to digest the budget. The breach of 5740 yesterday on closing basis which was also a monthly closing vindicates our bearish stance for 2nd half of 2013.
Since 5740 did not hold strongly [which I personally thought it would as mentioned in the previous update], the downside support now comes in the 5532-5580 zone [of which 5532 should hold strongly IMHO]
On the upside, 5880-5944 will be strong resistances.
2 consecutive closes above 5740 will confirm a minimum upside target of 5880 and 2 consecutive closes above 5944 will confirm an upside target of 6080 at least.
Critical Dates for March 2013
21st March 2013 - Spring Equinox [market is expected to take a definite direction for a move of 200-300 points in either direction in a 2 week period between 21st March '13 and 5th April '13 from closing prices of 20th/21st March 2013]
Other Economic Stuff:
Deflation is a myth and we should be rejecting deflation calls even if is from Nobel laureates like Roubini, Krugman or the active proponent of EW theory Robert Prechter. I am personally in full agreement with Nadeem Walyat's argument that Inflation and rising inflation is the result of quantitative easing measures. In every post, I will just point towards the consumption theme - if indeed headline inflation is low, why are fruits, vegetables, fuel prices etc soaring so much? Apart from the diesel price deregulation theme, the bottom line is that quantitative easing and debt monetization finds funds channelized into the most essential needs of mankind in the consumption theme. I personally don't care about what the official statistics are with regards to inflation data in India. The basket of goods was determined in late 1950s with different demographic profiles of citizens. Today that demographic profiles have changed drastically [and the same business channels take pride in declaring 'demographic dividend'!!!!] Milk, Eggs, Fuel, Education, Rents all are soaring faster than the wages [growing at about 8% PA on average]
My personal outlook regarding corporate loan restructuring has been vindicated by the announcement of the ARC setup. Now financial institutions have started engaging in buying/selling loan portfolios in the fixed income market and this is just a pre-cursor to what lies ahead. Just like the housing market bubble of US in the 2004-2007 period, we are witnessing the creation of an asset bubble destined to burst with corporate loans in India. The stock prices of banks are misleading because asset quality and toxic loans are not in the price so far. In part, the consensus opinion is that the banks will have some other party to pick up the toxic loan portfolio, thereby mitigating the risk levels of the bank. This is an absolutely wrong assumption because this assumption needs the counter-party to be solvent and with adequate capital / risk appetite. Indirectly, its a good thing as it will explode so rapidly when the trigger is pulled and provide a lower base to start things afresh. There won't be any armageddon as pointed out by economists; in the end its a zero sum game and life will go on as usual.
Coming back to the Nifty, the view remains that this is not the time to buy stocks. The buy zone is when Nifty hits 4800 levels with maximum exposure to NiftyBees, BankBees and InfraBees and in front-line stocks like LT, SBIN, ICICI Bank etc. For those looking at FMCG as a defensive bet [and indeed a lot of FMCG and Pharma stocks have doubled in the last 18 months], just take a look at what HUL is doing....In the last 3 weeks, there have been advertisements from HUL for sale of prime residential assets and the Unilever group in general is solidifying its back-office operations in Bangalore. All this is hinting towards challenges with 'spend management' and a pre-cursor that even the defensive bets will soon see a sharp selloff.
Falls, corrections are always healthy for the market as they bring in buying opportunities and create wealth at a rate faster than inflation. Whether the correction on Nifty starts now or after making a new high is unknown. But one leg of a sharp fall is inevitable before the mega-bull run slated to begin after elections 2014.
Enjoy the upsides till it lasts and patiently wait for the next buying opportunity is what I would personally advise.
New feature from March 2013: A video update along with the blog post
[Will be uploaded over the weekend]
