Monday, March 2, 2015

Outlook For March 2015

Well the budget is out of the way and there are multiple interpretations of the same.

First and foremost, it is a very positive budget on multiple counts

1. Sticky point GAAR is out of the way for 2 years; FPI/FDI norms simplified. Positives for FIIs. Taxation avoidance on Management in India v/s operations in Mauritius to be taxed in India is a bit thorny but that will be sorted out sooner than later.

2. More money in the common man's wallet with tax SOPs

3. A prudent review on fiscal discipline.

4. A roadmap for corporate taxation reduction

5. A good pension / superannuation scheme

On the negative side, higher taxation on Service Tax is going to impose a heavy burden on the common man. There are some more details that need to come out but the intention and direction is in definitely positive trajectory.

For Nifty, it is just a few points shy of making a new high; last month I had indicated that as per pattern targets, 8800 and 7800 are both on the cards. [I had also mentioned that Feb series is notorious for volatility on either side and we saw what happened] 8800 has been taken with conviction. 7800 still remains to be taken out and in all likelihood, will be taken out during the 'Sell in May and Go Away' phase of equities.

For March series, the critical supports remain at 8750 and 8580 levels on daily charts. As long as these 2 levels hold, buying the dips can be profitably from a trading perspective. The tricky point is BankNifty; its all time high is 20907 and recent swing low is 18226 - 61.8% of retracement comes to around 19880 levels (80% retracement is about 20370). Whilst the last week's daily charts have been very positive for BankNifty, IMHO the 20k levels [+/-200 points] may invite a round of profit booking / correction. Only when 20500 levels are taken out with volume and conviction, one can say that the uptrend has resumed on BankNifty.

Since Nifty is now around the 8900 mark, let us recap the intermediate supports

8425 - 8525 - 8590 - 8625 - 8680 - 8720

Only one resistance remains i.e. 8997 and above that is completely uncharted territory.

Pending pattern target on upside: 9200
Pending pattern target on downside: 7800

For BankNifty

Supports: 17500 - 18000 - 18200 - 18800 - 19200

Resistances: 19800 - 20000 - 20400 - 20900

Pending pattern target on upside: 21500
Pending pattern target on downside: 17500

For both Nifty and BankNifty, the pending downside targets are perhaps going to take longer and in all likelihood fructify in May series. In due course of time when clarity emerges, I will update the Twitter feed.

From an equity portfolio perspective, it is time to keep booking profits and reduce net long exposure. For those who are just starting portfolio investments, it is better to stick to the SIP mode. No matter what the media pundits say, current valuations are far too stretched. Equity indices are being fueled higher courtesy liquidity. That does not mean be brave and short but whenever the next leg of correction comes, it will be severe, fast and furious. The longer it takes for a meaningful correction, the harder will it be.

In terms of time, March series will have the most active period from 21st March [Spring Equinox] to 5th April. It will be a trader's heaven with high volatility and large moves.

Make the most of the opportunities in March and hope you will be able to close books for FY15 with good cheer on portfolios as well as trading.

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