So we are the last month of 2013. Nifty has remained above the 5944 mark after opening the year at 6000+ levels. One part of the jinx has been no new highs in a year when Nifty opens above 6000 in the January of that year. So far, that jinx has held. The other part has been a bad 4th quarter of the calendar year is usually bad. That hasn't happened yet. December will tell us the whether history will repeat itself or the jinx will be broken.
From the technicals perspective, as long as 5944 holds on weekly basis, no major down moves seen. As far as 5810 holds on monthly basis, no major down moves seen. Daily levels will keep changing [currently in the 6080-6125 zone] That Nifty is headed for new highs is a given because the condition of 2 consecutive closes above 6280 has been satisfied. Only factor is the election results and hence new highs may wait till that is out of the way. On the other hand, falls upto 5445 will be considered routine corrections / profit booking and such moves are healthy for the market.
Since the technical part is being discussed, I will also post the Nifty and BankNifty Charts
Nifty Daily
Nifty Weekly
BankNifty Daily
BankNifty Weekly
For a severe downfall that was expected, it can only be now triggered by Black Swan events like the Lehman Brothers episode in 2008. Right now, the most probable events come from German politics or the banking system of Denmark [where personal debt levels are above 350% of current networth] This is the highest in quantum and percentage for any country in the last 300 years on 'personal' indebtedness. The problem is very grave because the country has a small population of under 6 million people and the quantum is significant. Or it could be a war in the middle east whatever - as the name suggests, these events are Black Swan events. It is difficult to predict them because they come at random.
Assuming normal conditions, capital markets will continue to maintain upward bias as long as money printing takes place. From an Indian perspective, too much upside seems difficult with stubborn inflation and weak currency. Hence the elections are important from this perspective as well.
In terms of timing, the 10-12 days with 21st Dec '13[Winter Solstice] as the pivot will be good for traders. Markets will in all likelihood give a good 200-300 point move in either direction around this point of time. The RBI policy will see some knee jerk reactions in either direction but it is difficult for RBI to be very dovish at this point of time. My personal take is that we may see repo rates unchanged [for growth] and perhaps a CRR cut for liquidity that senor Raghuram Rajan has not done so far.
From the social perspective, the great expansion of central banks balance sheets into trillions of dollars/euros/pounds/yen are feeding the next crisis. There is no doubt about the fact that the banking and financial industry will trigger the next crisis. However, since 2013 did not trigger such an event [with Oct '87 and Oct '08 in hindsight], this event is perhaps now due around Oct '16
Why am I certain about such a thing happening
It took almost 2 years before the 1987 crash for the bubble to be fully set to be burst. Then came the tech boom. There was a lot of mania for dotcoms before the crash actually happened. The dotcom / tech mania is here for one and all to see. People tend to forget that IT is a critical factor for business today but IT is in reality an enabler. In the last run-up for the IT crash, technology was so rudimentary that people had to be hired to generate HTML syntax codes. Over a period of time, software was developed for the same and pure HTML coders had to find something new. Again, I reiterate that IT is a critical enabler. However, real business and economy still grows on the basis of brick and mortar businesses and jobs. Yesterday's game changing technology will become today's dud. One also must remember that there is no perpetual growth. I am all for technology but simply cannot forget the fact that a tech mania wrecks havoc on economies. Compounding to this fact is that for 1 successful Google or Linked In, there are 250-300 failures.
The other part that fascinates me is that the sector that has boomed in financial markets ends up being on television the most. At equity market highs earlier, we used to see most advertisements from the banking and financial services segment [relative to the proportion of other advertisements] This time around, most of the prime time advertisements are coming from the defensive segments like FMCG, Pharma [moving more towards generics] and food industry. Exploding marketing campaign budgets are suggesting that something is drastically wrong in the system right now. Nevertheless, the fact of the matter is Indian markets are headed for new highs in the next 18 months or so after the elections IMHO. Use declines as opportunities to buy.
This is really not the time to go short; this is a time to go long on the index and do a sectoral churn in the individual stocks in holdings. IT, Automobiles and Defensives have done most of what they could do. They may not fall much but the potential to go significantly higher from current levels is unlikely. The grossly beaten down counters like capital goods, banking [large-cap banks like SBI, Axis and ICICI], metals like Hindalco have more potential to grow now. [One may go through my posts since August where I have given the list of stocks with Buy zones] On the mid-cap funds, it is very difficult to pick winning contenders without insider information [and I don't have any access to such information :(] The next rally will see mid-caps picking up as well and one may buy into ETFs specifically related to midcaps like M100 or Junior Bees that derive value from the index.
So let us hope that there are no significant down moves in Dec '13 and we all manage to enjoy Xmas '13 and welcome 2014 with great cheer.
From the technicals perspective, as long as 5944 holds on weekly basis, no major down moves seen. As far as 5810 holds on monthly basis, no major down moves seen. Daily levels will keep changing [currently in the 6080-6125 zone] That Nifty is headed for new highs is a given because the condition of 2 consecutive closes above 6280 has been satisfied. Only factor is the election results and hence new highs may wait till that is out of the way. On the other hand, falls upto 5445 will be considered routine corrections / profit booking and such moves are healthy for the market.
Since the technical part is being discussed, I will also post the Nifty and BankNifty Charts
Nifty Daily
Nifty Weekly
BankNifty Daily
BankNifty Weekly
For a severe downfall that was expected, it can only be now triggered by Black Swan events like the Lehman Brothers episode in 2008. Right now, the most probable events come from German politics or the banking system of Denmark [where personal debt levels are above 350% of current networth] This is the highest in quantum and percentage for any country in the last 300 years on 'personal' indebtedness. The problem is very grave because the country has a small population of under 6 million people and the quantum is significant. Or it could be a war in the middle east whatever - as the name suggests, these events are Black Swan events. It is difficult to predict them because they come at random.
Assuming normal conditions, capital markets will continue to maintain upward bias as long as money printing takes place. From an Indian perspective, too much upside seems difficult with stubborn inflation and weak currency. Hence the elections are important from this perspective as well.
In terms of timing, the 10-12 days with 21st Dec '13[Winter Solstice] as the pivot will be good for traders. Markets will in all likelihood give a good 200-300 point move in either direction around this point of time. The RBI policy will see some knee jerk reactions in either direction but it is difficult for RBI to be very dovish at this point of time. My personal take is that we may see repo rates unchanged [for growth] and perhaps a CRR cut for liquidity that senor Raghuram Rajan has not done so far.
From the social perspective, the great expansion of central banks balance sheets into trillions of dollars/euros/pounds/yen are feeding the next crisis. There is no doubt about the fact that the banking and financial industry will trigger the next crisis. However, since 2013 did not trigger such an event [with Oct '87 and Oct '08 in hindsight], this event is perhaps now due around Oct '16
Why am I certain about such a thing happening
It took almost 2 years before the 1987 crash for the bubble to be fully set to be burst. Then came the tech boom. There was a lot of mania for dotcoms before the crash actually happened. The dotcom / tech mania is here for one and all to see. People tend to forget that IT is a critical factor for business today but IT is in reality an enabler. In the last run-up for the IT crash, technology was so rudimentary that people had to be hired to generate HTML syntax codes. Over a period of time, software was developed for the same and pure HTML coders had to find something new. Again, I reiterate that IT is a critical enabler. However, real business and economy still grows on the basis of brick and mortar businesses and jobs. Yesterday's game changing technology will become today's dud. One also must remember that there is no perpetual growth. I am all for technology but simply cannot forget the fact that a tech mania wrecks havoc on economies. Compounding to this fact is that for 1 successful Google or Linked In, there are 250-300 failures.
The other part that fascinates me is that the sector that has boomed in financial markets ends up being on television the most. At equity market highs earlier, we used to see most advertisements from the banking and financial services segment [relative to the proportion of other advertisements] This time around, most of the prime time advertisements are coming from the defensive segments like FMCG, Pharma [moving more towards generics] and food industry. Exploding marketing campaign budgets are suggesting that something is drastically wrong in the system right now. Nevertheless, the fact of the matter is Indian markets are headed for new highs in the next 18 months or so after the elections IMHO. Use declines as opportunities to buy.
This is really not the time to go short; this is a time to go long on the index and do a sectoral churn in the individual stocks in holdings. IT, Automobiles and Defensives have done most of what they could do. They may not fall much but the potential to go significantly higher from current levels is unlikely. The grossly beaten down counters like capital goods, banking [large-cap banks like SBI, Axis and ICICI], metals like Hindalco have more potential to grow now. [One may go through my posts since August where I have given the list of stocks with Buy zones] On the mid-cap funds, it is very difficult to pick winning contenders without insider information [and I don't have any access to such information :(] The next rally will see mid-caps picking up as well and one may buy into ETFs specifically related to midcaps like M100 or Junior Bees that derive value from the index.
So let us hope that there are no significant down moves in Dec '13 and we all manage to enjoy Xmas '13 and welcome 2014 with great cheer.
