Nifty is taking its time whether
to extend the rebound or to go to further lower levels. As mentioned in the
previous posts above 4950-4960 levels it could extend its bounce to another
90-100 points which should be considered as just an extension of a bounce back.
Let’s have a detailed look into the components which can have an impact on the
further moves in Nifty.If we consider the world economic
situation it is really awaiting a recession or I would say it would be the
second part of what we have seen in 2008. The rising dollar would be a real
concern for all economies and India too would not be seen as decoupled a
decoupled economy from this risk. This time the situation looks a little
different for Nifty. Nifty was falling, crude was falling and dollar was rising
and unfortunately the equity index could not make use of the falling crude because
of the rising dollar. Thus when the crude starts rising nifty cannot go up in
the same pace as the rate hike cycle can start again with the inflation rising
again in the country. Have a look into the chart of Dow, it has made a bearish
island around 13400 and would struggle to move up in the coming sessions. As an
alternate hypothesis if it moves up and crosses 13400 -500 levels on the upside
it can just be considered as an extension of the up move and not a fresh one.
At this juncture Dollar index would give the first indication of equity markets
bottoming out because I expect it is in the last leg of the up move. If we take
the case of Dollar / Inr it is quite different as it is following Dollar index,
thus if dollar index makes a reversal dollar/inr would follow. Now let’s have a
look into the volume data, it shows a lower turnover data for the past 2-3
months and this shows the lack of interest from the market participants due to
the policy paralysis in India. The selling in the equity market does not show
any portfolio unwinding and that’s why I would like to stick to 4500 than any
other lower levels. Remember all the
major bull markets happen when the pessimism at its peak and if there is no
major selling happening it seems to be some kind of value buying happening at
lower levels. It is surprising to see a petrol rate hike when the crude is
cooling off from its high and I wonder how would they react when the crude
shoots ups again. If the measure was to arrest the rising dollar they would get
it wrong this time too as this would lead to major problems in the domestic
front.
Nifty medium term outlook – As
of now everybody is expecting a bounce back above 4950 which would be a 3rd
wave breakout in the short term, (for a chartist 3rd wave usually
gives a dream run).If we could see the chart we could see a well respected
downward slopping trend line. The trend line shows levels of 5100 levels as the
major resistance and if a short term bottom is in place Fibonacci number shows
5300. These are the levels one might get trapped on the upside as people start
saying a bottom is in place and the market is undervalued, we could hear people
saying about 7000 levels and from these levels nifty could most probably slip
to 4500 levels. Read the market volume during this course of time and see what
the smart money is actually doing in the market. In a new trend always look for
three sectors Auto, metals and banking. Auto sector would probably give the
first reversal, metals would trigger the move on upside or downside and banking
would lead the index on any major move. Now it is a wait and watch game for us
to see how nifty is going to react to the news flow in the market.
