Time to book profits and preserve the capital....

Most of the people hate stock market because of its volatility and uncertainty. Now the stock market is entering into that phase. There are so many events lined up , global as well as local. One of the most important event " Loksabha election result" will come in next few days. Because of that market can be very volatile. If you are on right side of the market then you will earn huge profits or vice versa. To be very frank election results impact will be very short term in nature, may be a quarter or two.

Ultimately market follows fundamentals. Stock market is function of corporate profits, if earnings are not catching up we will not see capital appreciation either. Analysts are expecting earnings growth since last 3-4 years but we have not seen much improvement in earnings. Market has gone up just because of liquidity. Since last 4 years NIFTY EPS is just moving in the range of 390-410. Any negative news can take market down heavily. It can be Local or Global. It can be Election results or US-China trade war or Brexit or anything else. Always remember fear is always greater than greed. So stock market falls are always faster than rallies. If we preserve our capital in these falls then only we can enjoy the up move of the market.

Right now market has discounted that NDA will form the govt. If actual results deviate from this then volatility will increase. So one should book partial profits and exit 50% stock portfolio before election results. If NDA forms the govt and Nifty goes above 11800-12000 levels then book full profits and wait for correction. If NDA wont come to power, one should book profits and wait for more correction.

On Technical front, momentum indicators are giving negative diversions on Daily, Weekly and Monthly charts. Major Support for NIFTY is around 11000-11100.Major resistance will come around 11800-12000. 

To conclude, any rally must be used to book profits and wait for correction.The correction can be price-wise or time-wise. In short  Long term bull run in Indian economy is still intact but we can't ignore short term correction. Happy Investing!!!!

USD/INR View: Short USD/INR Future at 66.80 for target of 63 and 59

Since last 5 years US Dollar was appreciating against Indian Rupee. It made a high of 69.20 in February 2016. But now the trend will change soon. If USDINR breaks 66.15 on closing basis, it will give confirmation of down trend. Second level confirmation will come below 66.

On Daily chart, USDINR has already given sell below 66.72. It has created Island Reversal pattern. Now 200 days simple moving average placed around 67.35 which will act as a resistance. Now support will be in the range of 66-66.15. Below that support we may see a sell- off in the US dollar.

USDINR has broken major support line on monthly chart in March and made a low of 66. After making a low of 66.15, it retraced 61.8% and made a lower high of 68.25 (Support line has become Resistance line). If USDINR gives close below 66.83 on monthly chart, it will be engulfing bear candle which is also bearish pattern.

Normally there is 30 paise difference in USD spot and one month future. That 30 paise difference is basically interest rate differential between two countries. Now Spot is around 66.50 and October future is around 66.80. Let us assume spot will be as it is for entire October month. So if we sell one lot of future at 66.80, it will come down to 66.50 on expiry. So by selling one lot future we will earn Rs.300 per lot (0.30 * 1000) on investment of 1500.

To conclude, one should sell USDINR October future at CMP (66.80) with stop loss above 67.50 for targets of 63 and 59. 

Sensex may Hit 100000 ( One Lac) by 2022

Last April, I had predicted correction in Indian Equity markets and Sensex corrected around 25% from its all time High (Sensex - 30000 to 22500). As explained in my last year’s blog, corrections are painful at the time but a very healthy part of whole mechanism. Now it’s time to BUY once again for long term. In my opinion market will create a base around 23500-25000 in a month or two. So start buying good stocks to achieve your long term goals and dreams.

Fundamental View

Lower  Crude Oil:

Global economies are still under pressure. Europe, Japan is in recession. Though US have started increasing interest rates after 6 years but the pace of rate hike is still low. China economy is also slowing down. Because of global slowdown Crude oil hit 12 years low. Technically Crude oil will not go above $60 for next 2-3 years at least. Overall crude oil fall is helpful for India as we import almost 80% crude from abroad. We are going to save lots of currency reserves because of lower crude rates.

Above average Monsoon:  

Last two year’s monsoon was below its long term average. IMD is expecting normal rains this year which will improve rural economy. The Seventh pay commission will also help in increasing demand from rural sector.

Lower Interest Rates:

If it rains normal then overall food inflation will be under control and RBI will have some more room to cut interest rates.

Majority in Rajyasabha : Since last two years, NDA government faced lot of problems in Rajyasabha. Currently Congress has majority in rajyasabha but in next two years strength of NDA and UPA will become almost the same. In that case with the help of other regional parties NDA can clear major bills in both the houses.

Indian GDP:

India got independence in the 1947 but it took 60 years to become 1 Trillion $ economy. In 2007 Indian economy surpassed 1 trillion $ mark. To become 2 trillion $ economy India took just 7 years. Overall Indian economy is in sweet spot; if everything goes right we will start hitting 8-9% GDP growth. Now India will become 3 trillion $ economy in next 4 years and 4 trillion by 2024.  

Technical View

Short Term View:

On Daily Chart Sensex is forming Inverted Head & Shoulder Pattern. Sensex should make a short term Top around 26000-26300. We may see some profit booking around this level. Sensex will create second shoulder of a pattern in this profit booking. It will make a base around 23500-24500 in next few days. One should start accumulating good Stocks on this correction. This will be the last correction.

Long Term View:

Sensex is still maintaining its long term support line. Support for this year is around 22000-22500, we will not see major sell off unless Sensex gives close below its support on yearly chart. Now the chances are very remote that Sensex will make a new Low. From 1988-1992 Sensex became 11 times, so we saw 11 years sideways correction after that Rally. Same thing happened 2003-2007, in 5 years Sensex became 7 times. We saw a sideways correction of 7 years from 2007 to 2014. Now Sensex has made a good base for next Rally. India, the fastest growing country in the world has become favourite destination for FII. 

On the basis of Historical data, I am expecting sensex to hit 1, 00,000 (One Lac) by 2022. Some people may think this is impossible but I am just following the charts. Please don’t miss this mother of all bull markets. Happy Investing!!!!

Gold Bull Run will start soon; all investors please fasten your seat belts for next Gold rally…

Since December 2013 Gold was in correction mode. It came down from 35000 to 25000 in last 3 years. As per my expectation it made a base around 25000. Now it will start rallying again. 

http://www.dhaneshbhagwat.blogspot.in/2013/04/long-term-trend-is-still-bullish-in-gold.html

Gold will always outperform when Global markets are in financial trouble. Currently all world economies are facing big financial problems. All major central banks have pumped liquidity in to the economies by lowering interest rates and through Quantitative easing. Still economies are not performing that well. So countries have started depreciating their currencies to support exports. 

Technically also Gold has made bottom near 24500-25000 levels. Now it will be very difficult for Gold to break that level easily. Momentum indicators are also giving Buy signal on Daily, Weekly and Monthly charts.

To conclude, one should Buy Gold Future at CMP-26750 with Stop Loss Below 25500 for target of 28500, 31000 in next few months. Gold will touch 54000 by 2020.

Those who want to take position in spot market, they can buy Sovereign Gold Bonds issued by RBI which will give 2.75% interest over and above normal capital gains. 

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 !!!