So it has been yet another roller coaster month starting with gains, then a sudden fall and a mind boggling recovery. If we analyze the last 3 months, this has been a pattern with Nifty
It starts the series with a rock solid opening only to fizzle out sooner. A lot of people are already resigned to the fact that August may again repeat the same story. Unless a Black Swan event comes through, I personally believe that this time the story will tilt towards the bulls.
Over the last couple of months and July as well, the 8380-8425 zone was critical on the monthly time-frame. In May, the series ended at 8433 [border] and in June the series ended at 8368 giving a fair clue that prices would gravitate towards 8400 as we move closer to expiry.
31st July is the first day of the August series and it seems deja vu as far as first day of stellar performance is concerned. What is critical is that it is the close of the month as far as technicals are concerned [Technicals don't care when expiry is done!] The crucial zone for month close was 8380-8425. We have closed well above that for the calendar month of July. This makes August series a high probable month for bulls. Will there be no correction at all?? Corrections are healthy for the market and will take place - the quantum is what matters. So from a mathematical, statistical and technical point of view, the max downside is 8180 for August series barring Black Swan Events.
Even if the Nifty drops to 8180 levels, it is poised to recover smartly just as the case was with the recovery from 7940 levels. On the upside, 8800-8825 zone has been a high resistance zone on Nifty. As of now, the expected range for Nifty in August series is 8200-8800. We are right at the middle zone right now. I cannot say which end of the range will get a visit first. If we do get to the upper end of the range first, I will be cautious with shorting. On the downside, I would be a buyer in the 8180-8280 zone with SL at EOD < 8080
For the BankNifty, the expected range is 17800-19200 levels. 18800 level also has been critical for the last 2.5 months with just 1 week when BankNifty was above this zone. When I look at the major banking names, even with a stellar performance on Friday, SBIN is at critical resistance of 275-282 band. ICICI Bank has stiff resistance at 325 levels for now. LT has made a double top in the 1825 zone. Which end of the market will be visited first - will get clearer by Wednesday, 5th Aug '15.
NIFTY / BANKNIFTY CHARTS
To summarize, I don't think there is too much potential for Hindalco and Tata Steel to outperform as such. The true range is known. These counters should be accumulated when the prices are below the true ranges. Being linked with prices of metals on international markets and debt-intensive nature of the businesses, they can't go on to make fresh highs. Forget fresh highs, they perhaps may not even visit the old highs!
Tata Global Beverages is a futuristic story on aspirational Indians. L&T Finance and IDFC are in the budding stages to become the next Sriram Transport Finance, Yes Bank, Kotak Mahindra Bank, Bajaj Finserve etc.
Disclosure: I do have personal holdings in the mentioned counters directly or through family members. I have also shared / recommended these counters with contacts in my professional network.
It starts the series with a rock solid opening only to fizzle out sooner. A lot of people are already resigned to the fact that August may again repeat the same story. Unless a Black Swan event comes through, I personally believe that this time the story will tilt towards the bulls.
Over the last couple of months and July as well, the 8380-8425 zone was critical on the monthly time-frame. In May, the series ended at 8433 [border] and in June the series ended at 8368 giving a fair clue that prices would gravitate towards 8400 as we move closer to expiry.
31st July is the first day of the August series and it seems deja vu as far as first day of stellar performance is concerned. What is critical is that it is the close of the month as far as technicals are concerned [Technicals don't care when expiry is done!] The crucial zone for month close was 8380-8425. We have closed well above that for the calendar month of July. This makes August series a high probable month for bulls. Will there be no correction at all?? Corrections are healthy for the market and will take place - the quantum is what matters. So from a mathematical, statistical and technical point of view, the max downside is 8180 for August series barring Black Swan Events.
Even if the Nifty drops to 8180 levels, it is poised to recover smartly just as the case was with the recovery from 7940 levels. On the upside, 8800-8825 zone has been a high resistance zone on Nifty. As of now, the expected range for Nifty in August series is 8200-8800. We are right at the middle zone right now. I cannot say which end of the range will get a visit first. If we do get to the upper end of the range first, I will be cautious with shorting. On the downside, I would be a buyer in the 8180-8280 zone with SL at EOD < 8080
For the BankNifty, the expected range is 17800-19200 levels. 18800 level also has been critical for the last 2.5 months with just 1 week when BankNifty was above this zone. When I look at the major banking names, even with a stellar performance on Friday, SBIN is at critical resistance of 275-282 band. ICICI Bank has stiff resistance at 325 levels for now. LT has made a double top in the 1825 zone. Which end of the market will be visited first - will get clearer by Wednesday, 5th Aug '15.
NIFTY / BANKNIFTY CHARTS
A glance at the weekly chart clearly shows that unless there is some major economic catastrophe, the severest correction will not take Nifty below 7442-7525 levels.
BankNifty weekly chart clearly shows why most of the action will be in the 18500 +/-300 points zone for most of August series [21, 34 and 50 week Moving Averages are trying to converge at 18500 levels] First, they will converge [4 to 6 week process] and then determine whether an upper cross-over has to happen or the other way around. As far as my understanding of MAs in higher timeframes is concerned and the concept of 'Regression To The Mean', even if on an hourly or daily time frame, prices go above / below 18200 and 18800, prices will gravitate or levitate towards 18500 till convergence of 21, 34 and 50 week MAs]
The range is pretty good on Nifty as well as BankNifty from a trading perspective in August. Falls will be buying opportunities. As far as shorting goes, it is better to wait for confirmation on at least daily time frame.
For the EOD June contest, our winner is Asit. My apologies for not having got back to you in time.
Will connect with you personally next week.
Stocks for buying on delivery basis [Longer Term Recommendations]
I would still go with the metals pack Tata Steel and Hindalco. Tata Steel may correct downwards upto 150 levels also but will find its way back to 300, followed by 450 in a 3 year timeframe.
Hindalco may correct downwards to 70-75 levels also but it will most likely reclaim 160 in a 3 year timeframe.
Tata Global Beverages: The stock has been in a range of 120-150 for over 3 years now. It is likely to do that for some more time. However, I personally believe that this stock is a potential multibagger with a 5-7 year horizon in mind. This stock has potential to repeat the past outperformance of Tata Coffee and Trent Retail.
In the financials, L&T Finance and IDFC would perhaps be the next outperformers with a 5 year horizon in mind. L&T is gearing up to be a supermarket of funds and insurance and will perhaps bag a banking license soon. IDFC has been good with fund management on both equities and debt. With more innovative products like Trade Finance and Supply Chain finance, this stock has the potential to be the next Yes Bank / Kotak Mahindra Bank in terms of relative stock outperformance.
We must note that such scrips stay in embryonic / gestation phase for longer periods of time and then shoot up like bamboo sticks. One needs to be extremely patient. There was a time when Axis Bank and ICICI Bank were traded at 28 rupees a share [2.8 rupees considering the stock splits] They simply kept oscillating around this range for almost 5-6 years before soaring to stratospheric levels
Even the 52 Week Low of ICICI Bank is 100 times the original price [considering split]
To summarize, I don't think there is too much potential for Hindalco and Tata Steel to outperform as such. The true range is known. These counters should be accumulated when the prices are below the true ranges. Being linked with prices of metals on international markets and debt-intensive nature of the businesses, they can't go on to make fresh highs. Forget fresh highs, they perhaps may not even visit the old highs!
Tata Global Beverages is a futuristic story on aspirational Indians. L&T Finance and IDFC are in the budding stages to become the next Sriram Transport Finance, Yes Bank, Kotak Mahindra Bank, Bajaj Finserve etc.
Disclosure: I do have personal holdings in the mentioned counters directly or through family members. I have also shared / recommended these counters with contacts in my professional network.
