Traders can book profits below 8269 and long term investors must accumulate good stocks on correction...

Since last one and half year Nifty has given almost 78% return. (5118 to 9119). So I am expecting a correction in Nifty, if it breaks 8269. Stock market correction, although painful at the time, are actually a very healthy part of whole mechanism. In last Bull run (2003-07) also, we have seen such corrections. In 2004 & 2006 Nifty had corrected almost 30%. In 2008 we saw a major correction of 60%. But after 2010 we have not seen a major correction. As I have shown in below monthly chart, correction is on the cards. Nifty is making Popgun Pattern on monthly chart and Head and Shoulder pattern on Daily chart.
So be cautious...
                                                                          Nifty Daily

On Daily chart Nifty is making Head and Shoulder pattern. If Nifty breaks 8269, it will confirm the down trend. RSI is also giving negative divergence. So minimum target of this pattern is 7860. It can go down to 7420 also.

                                                                     Monthly Chart

On Monthly chart Nifty is making Pop gun pattern. Popgun pattern is also a trend reversal pattern. And RSI is also in overbought territory. Long term trend line support is also near 7080.

To Conclude, Short term traders should book profits below 8269 and long term investors must use this correction to accumulate good stocks. Traders can go short below 8269 for target of 7860-7420-7080 with a stop above 8850. Happy Trading !!!!

Time to enter Equity market for Long Term Investors!!!!

Since last 5 years I was advising my clients to park their funds in debt instruments. Now it’s time to change the strategy. After Narendra Modiji’s spectacular performance in Lokasabha elections, Nifty made all time high 7563. In last one month Nifty has appreciated by almost 25%.I think Nifty has made it’s short term High.  I am expecting one last correction in the market. It can be pricewise or timewise.  So Long term investors must start to accumulate good stocks or mutual funds.

Now 7080 is very crucial level for Nifty ( Sensex-23730). If Nifty breaks that level then it can come down to 6800-6400-6000.

So that’s the time to enter equity market once again. Long term investors must use this fall to accumulate good stocks. It is very difficult to predict top and bottom, so one should start buying systematically.

These are some diversified funds who has given good returns in SIP.

		SIP Period in years
Scheme Name	1	3	5	10	15
Reliance Growth Fund- Growth	67.84	21.64	12.85	16.13	25.69
HDFC Top 200- Growth	69.54	24.20	15.73	18.22	23.68
UTI Dividend Yield- Growth	46.42	16.20	11.67	N.A.	N.A.
Franklin India Bluechip- Growth	39.45	17.08	12.31	14.98	21.02
DSp Blackrock Top 100- Growth	46.68	18.34	12.50	15.87	N.A.

Following Sectors looking week:

IT, Pharma & Healthcare, Real Estate, Consumer Durable

Following Sectors looking Strong:

Capital Goods, Banking, Metals, Sugar and Power

To Conclude, Short term traders should short Nifty below 7080 for target of 6800-6400-6000 with a stop loss of 7570. Long term investors must use this fall for accumulation. This is last chance to enter equity market. Happy Trading!!!!

Diwali Picks

Its Diwali yet again! This year has been a roller coaster ride with very high volatility across asset classes. Discipline and focus will help us ride the volatility. Last year, as we had predicted, nifty made a high 6200 and consequently a low of 5100.

For a person who had invested in the nifty in 2008 has generated no return at all, even most mutual funds are under water since most mid cap and small cap stocks are closer to their yearly lows than highs, going forward also we expect the nifty to consolidate with elections looming and economy still to pick up. Investors who have been able to invest in specific stocks with strict discipline are able to generate above average returns. Hence, this year we are going to be more stock specific with no particular view on the nifty.

Therefore, we should invest 50 percent of our portfolio in low risk tax free bonds and the remaining 50 percent in high risk stocks and commodities.

Our view on gold remains the same; at least 10 percent of your portfolio should be invested in gold as insurance against weak government policies and rising dollar.

The interest rate scenario is not very clear with RBI still raising rates due to high inflation but we could be closer to a top in rates, hence some money should be invested in long term bonds.

Have a Happy & Prosperous Diwali !!!

Long term trend is still Bullish in Gold!!!

Since last three days Gold has fallen almost by Rs.4000 and I got more than 20-25 calls from clients. Everybody was asking,” is this right time to buy gold??” So in this blog I am going to give my views on Gold.


India is largest importer of Gold in the World. Though we are largest importer, we are still price taker. Our Gold price is dependent on 2 factors.

1. Gold in Dollar terms     2. Dollar/ Rupee rate

Gold in Dollar terms

Normally Gold follows 20 years time cycle. The last Bull Run has started from year 2000. In 1980 Gold was around $875; in 2000 it made a low of $250. In 2008 it made a High of $1034 and corrected to $680 in 2009(30% from High). From $680 it started going up once again and made a high of $1920 in 2012. Now in this correction, Gold can go to $1250-$1300 once again. Long term investor should start investing around $1300. Normally the last leg is extended leg in commodity market. So Gold can go up to $3000 by 2020.

Dollar/ Rupee rate

As India is an importer of Gold, Dollar and Gold are positively correlated. Gold price in India increases with Dollar appreciation and vice versa. In 2000 Dollar was around 43 against Rupee; it has appreciated to 57 in 2012 by almost 35%. The Support from Dollar will continue for next 2-3 years. Currently $ is quoting at 54.20. In my opinion 53 is a major support level for Dollar, it will not break this level easily. On the upper side, if it breaks 55 levels then it will go up to 59 at least. As I said earlier also, last leg in Commodity and Currency are extended leg. So it can take Dollar to 62-64 levels also. In short, Dollar is going to support Gold prices in India, so keep your eyes on Dollar as well.

Gold in India

In 1925 Gold was around Rs.18.75 per 10 grams. In 2011, it became 26400 so Gold has given around 8.8% compounded annual growth rate (CAGR) for last 86 years in India. With the same return, we can expect Gold should be at Rs.40000 by 2016 and 55000 by 2020.

Yesterday Gold made a low of 25500; it has corrected almost 22% by its all time high of 32500. Normally 25% to 30% correction is considered to be healthy. Now the minor support for Gold is around Rs.25000 and if it breaks that it can go down to Rs22000 to Rs.23000 also. In my opinion one should start Systematic Investment Plan (SIP) around 25000 for next one year.

To Conclude, Gold should make a base around Rs.23000-Rs.25000 in next few months. Hence, long term investors can start accumulating Gold for the target of Rs.40000 by 2016 & Rs.55000 by 2020. So those who have missed the train earlier can enter Gold once again.
Happy Investing!!!

 

Exit, Exit and Exit from Equity!!!!

As I mentioned in my previous blog, Nifty reached 5950. Now it can go up to 6200-6250 also but investor must use this rally to book profits & park their fund in long term debt instruments. From this monetary policy RBI may start cutting interest rates; so those who will hold long term debt instruments like Tax free Bonds or NCDs will get capital appreciation on their debt instruments. In my opinion RBI may cut Repo rate by 200 basis points in a year or two. So debt investors will get at least 15-20% appreciation over and above interest rate.


Now 5830 level is major support for Nifty. If Nifty breaks this level we must exit equity. Second level confirmation will come below 5555. As I said in my previous blog one big sell off is still pending in the market, so better we exit at this point. Now market will become very volatile. I think one should not carry any long position in futures.

Following sectors looking weak:


Capital Goods, Consumer Durables, FMCG, IT, Metals, Power & Real Estates

Following sectors outperform the market:

Banking, Oil & Gas, Healthcare & Auto

To conclude, one should short Nifty below 5830 for target of 5555-5400-5200, stop loss above 6300. Those who don’t want to take short position in market they can buy listed tax free bonds or NCDs. Happy Trading!!!!

Short term trend is Bullish…

As I mentioned in my previous blog, 5400 was a crucial resistance for Nifty. Nifty broke that resistance and made a High of 5630 but couldn’t succeed to hold that level. It came down to 5135 once again. Now 5200 to 5400 is the range for Nifty and either side breakout will decide the new range for Nifty.


I think bias has shifted to buy side for short term & we may see a triangle breakout which will take nifty to 5900-5950 level. But that does not mean the major trend has changed, market will come down once again. It will not make a new high.

These stocks may outperform in short term.

In this leg Mid Cap & Small cap firms will outperform the large cap stocks. So I will suggest invest in mid cap stocks of strong sectors

Sectors Looking Strong on Charts:


Auto, Banking, Pharma n Healthcare & FMCG


Sectors looking weak on charts:


Oil & Gas, Metals, Real Estate, Power & IT


To conclude, one can buy Nifty above 5390 for target 5940 with a stop loss below 5135. This is pure short term view, biased is still negative so investors can still hold their funds in debt instrument. One large sell off is still pending in market. Happy Trading!!!!

Is Market Bottomed Out????

When everybody in the market expects market to come down, market always reacts opposite. The same happened this time. Everybody was bearish on market and giving down targets. After breaking a low of 4632, Nifty made a new low of 4538. All market participants were expecting Nifty to come down to 4300-4000 level but Nifty reacted differently. Nifty gave a good bounce back in January and came back again to 5149 level. Is market bottomed out????


I will wait for confirmation. Still there are no signs of trend reversal in Nifty. Neither I found any trend reversal pattern nor Nifty has made Higher High and higher low (previous high 5402 is still intact). So I will wait and watch.

Let us assume Nifty has bottomed out then also it will have to come to 4850-4900 before making new High. If Nifty takes support at this level and gives bounce back and makes a new High, then only we will mark this as trend reversal. Second level of confirmation will come once Nifty breaks 5400 level.

Now let’s look at the chart; whenever RSI is near 70, Nifty has changed the trend. It has started coming down from that level. Since last one year whenever Nifty is coming down volumes are high and low on bounce back. In this bounce back also volumes are low.

Following Sectors looking weak on Charts:

IT, Metals, Power, Real estate, Oil & Gas

We may see profit booking in following sectors:

Consumer Durables, Capital Goods, Mid Cap and Small cap

Following sectors will Out-perform the market:

FMCG , Auto, Banking & Health Care

To Conclude, Nifty has not bottomed out yet. We will wait for confirmation. Confirmation will come only if Nifty makes higher low around 4850-4900 and then makes new High. If not, then we are still in down trend and down trend will resume once again below 4780.


WAIT AND WATCH FOR CONFIRMATION. Happy trading!!!!!!!