Last week we wrote...
"My feeling is that we will get one more chance during this week, when the markets may head lower but not as much as it did in recent past. Here goes my estimates for next week:
1. Nifty is expected to go down up to a level of 5240 and then it should bounce and close the next week at around 5420-5450 kind of levels. This assumes that we are not making an incremental low. The medium term investors are advised to buy into this temporary weakness. The premises for the weakness is that on Friday we sold off aggressively and during first 2-3 days of next week, we are expected to continue see the follow up selling. However, the selling would be more in the form of profit booking rather than the significant shorts building up in the futures or the long unwinding.
2. Similarly, Bank Nifty is expected to go down to 10,335 levels and then recover to around 10,800 levels. Those who did not buy the bank stocks can look at buying them at such levels.
3. Pre-budget announcements, speculation over interest rates and 3G scam related news will continue to be in the focus. Large corporate houses involvement in 3G scam will be the fuel for markets to go down.
4. Egypt story of dethroned dictator is slowly spreading to other middle east oil producing countries (Libya, Iraq and Bahrain), and this can again put pressure on crude oil prices. If this happens, it would be really bad for our economy which is already struggling from inflation, high current account deficit and unmanagable fiscal deficit. I feel this being the larger risk, which most TV Channels and analysts are currently ignoring."
When we wrote this last week, the Nifty was at 5453 and within the week it went up all the way to 5589. Similarly, Bank Nifty was at 10,927 when we wrote that Bank Nifty is expected to go down to 10,335. Bank Nifty later made a high of 11,099, before going down all the way to 10,170...And then recovering to 10,500 levels.
But Now what ?
On Monday, we will go into the Budget Session. This is 3rd Union Budget from Congress. That means we are half way through and if at all any big change has to be made for fiscal consolidation or Corporate India, it is NOW. 4th and 5th Budget will likely be much more populist & "aam aadmi" centric. India will not have a chance to take any bold steps which might hurt the sentiments of "aam aadmi" during 4th and 5th budget. So, if at all there is anything of that sort to be done, it is now.
But...
Congress as a Govt & Budget as an event - both are over talked but least exciting in action. The markets and common man generally anticipate a "BIG change" from the seemingly landmark event which happens only once in a year. But, we must understand that anything the Govt. does as a "BIG change" becomes the minimum benchmark for coming years. And thats why to bring out a "Big Change" is not easy, for any govt. For Congress, which is known for its Non-action it is all the more obvious that they will make sure that the Budget will be a Non-Event.
Inflation is at the centrestage of recent politics. But everyone knows that this is more to do with the global flows getting attracted to growing economies like India rather than any significant supply side concerns. Also, food inflation is expected to cool off in coming days as the Rabi Crops will be harvested in March & April. So, relative to last few months, the Inflation should not be the party spoiler. So expect no landmark stance on curbing inflation immediately. March end RBI Policy raising 0.25% is what the maximum action expected. And I think that is more or less factored by the markets.
Also, the roll back of incentives given during recession is very much on cards. Curbing Government Expenditure and getting Fiscal Discipline back must be the main message of this budget. This would mean, that this budget will stress on 4.80% or lower Fiscal Deficit number by doing everything possible to increase revenues on oneside and curbing government expenditure in such a way which does not hurt the growth.
Coming back to the Micro Market Movements, here are my estimates for next week and probably for the entire month of March.
1. I feel the downside is limited at least for now. However most important supports for Nifty is 5260 to 5160. For any reason, if this breaks, the Nifty will immediately lose 400 points more and can go down all the way to 4760. That would be around 16,000 sensex (our annual target for sensex).
Similarly, for bank nifty a very important support is at 10,240-10,100 range. If it breaks this range, it can immediately go down to 8786.
But I do not subscribe to this view. I am more bullish than bearish at least for this month.
There are two reasons for this:
First, In March, the Domestic Insurance Companies are big buyers. LIC alone is expected to be an investor of around 15,000-20,000 Crores in Q4 and large part of that comes in March alone. Almost half of this amount can further be added by Private Insurance players. That means we are expected to see around 10,000-12,000 Crores of buying by Insurance Sector alone during March.
Just to give idea about how big is this amount: FII's net selling averages at around 500-700 Crores per day for last few weeks. That means in March alone, the markets can absorb another 20 day's FII selling comfortably.
With FIIs selling off already 10,000 Crores and there is no reason for markets to go down except the temporary crude crisis, I dont agree that they are planning to sell another 10,000 Crores in March !
So, thats the comfort in back of my mind for March month alone.
Second,
After 13 weeks of fall we have gone up 2 weeks. Now, it is not convincing why the pull back would get over in just about 2 weeks. We are not going down for any fundamental reason. Except Crude there is nothing disturbing. And the moment Crude goes below 94-95, it will start falling again, which will bring strong rally in markets across the world. And there are reasons for that. OPEC has enough idle capacity to compensate for Libyan production. So I feel, it is more of speculative crisis rather than real crisis in Crude.
This 13 week's fall can get extended to 21 weeks (6 more weeks) only if there is an incremental serious bad news - say if the geo-political tension converts into a serious WAR between Gulf and US.
My best estimate is that we will have a pull back for at least 5-8 weeks (2 weeks over). In this, we can go up to even 6,000 of Index, before falling for last leg.
2. Which are the potential targets on the upside, where we will meet the selling?
In case of Nifty, we will see a strong resistence between 5440 & 5490. Similarly, it will be tough to cross 10,919 on the bank nifty. My estimate is that we will first go up on the bank nifty to around 10,900 levels and then may come down to 10,600-10,500 levels.
In all probability we may see bank nifty coming back to 10,500 levels only after RBI policy on 24th March.
But what is important is, although I am more bullish and less bearish, the Nifty levels of 5440-5490 are to be watched very closely. If the markets comfortably cross these levels, we can confidently say that we are going towards 5700-5800 levels during March itself.
Thats all for this week. Wish all the Market Watchers Best for their trades and investments.
Do give me your feedback about my blogs on bhuvan.singhi@gmail.com
"My feeling is that we will get one more chance during this week, when the markets may head lower but not as much as it did in recent past. Here goes my estimates for next week:
1. Nifty is expected to go down up to a level of 5240 and then it should bounce and close the next week at around 5420-5450 kind of levels. This assumes that we are not making an incremental low. The medium term investors are advised to buy into this temporary weakness. The premises for the weakness is that on Friday we sold off aggressively and during first 2-3 days of next week, we are expected to continue see the follow up selling. However, the selling would be more in the form of profit booking rather than the significant shorts building up in the futures or the long unwinding.
2. Similarly, Bank Nifty is expected to go down to 10,335 levels and then recover to around 10,800 levels. Those who did not buy the bank stocks can look at buying them at such levels.
3. Pre-budget announcements, speculation over interest rates and 3G scam related news will continue to be in the focus. Large corporate houses involvement in 3G scam will be the fuel for markets to go down.
4. Egypt story of dethroned dictator is slowly spreading to other middle east oil producing countries (Libya, Iraq and Bahrain), and this can again put pressure on crude oil prices. If this happens, it would be really bad for our economy which is already struggling from inflation, high current account deficit and unmanagable fiscal deficit. I feel this being the larger risk, which most TV Channels and analysts are currently ignoring."
When we wrote this last week, the Nifty was at 5453 and within the week it went up all the way to 5589. Similarly, Bank Nifty was at 10,927 when we wrote that Bank Nifty is expected to go down to 10,335. Bank Nifty later made a high of 11,099, before going down all the way to 10,170...And then recovering to 10,500 levels.
But Now what ?
On Monday, we will go into the Budget Session. This is 3rd Union Budget from Congress. That means we are half way through and if at all any big change has to be made for fiscal consolidation or Corporate India, it is NOW. 4th and 5th Budget will likely be much more populist & "aam aadmi" centric. India will not have a chance to take any bold steps which might hurt the sentiments of "aam aadmi" during 4th and 5th budget. So, if at all there is anything of that sort to be done, it is now.
But...
Congress as a Govt & Budget as an event - both are over talked but least exciting in action. The markets and common man generally anticipate a "BIG change" from the seemingly landmark event which happens only once in a year. But, we must understand that anything the Govt. does as a "BIG change" becomes the minimum benchmark for coming years. And thats why to bring out a "Big Change" is not easy, for any govt. For Congress, which is known for its Non-action it is all the more obvious that they will make sure that the Budget will be a Non-Event.
Inflation is at the centrestage of recent politics. But everyone knows that this is more to do with the global flows getting attracted to growing economies like India rather than any significant supply side concerns. Also, food inflation is expected to cool off in coming days as the Rabi Crops will be harvested in March & April. So, relative to last few months, the Inflation should not be the party spoiler. So expect no landmark stance on curbing inflation immediately. March end RBI Policy raising 0.25% is what the maximum action expected. And I think that is more or less factored by the markets.
Also, the roll back of incentives given during recession is very much on cards. Curbing Government Expenditure and getting Fiscal Discipline back must be the main message of this budget. This would mean, that this budget will stress on 4.80% or lower Fiscal Deficit number by doing everything possible to increase revenues on oneside and curbing government expenditure in such a way which does not hurt the growth.
Coming back to the Micro Market Movements, here are my estimates for next week and probably for the entire month of March.
1. I feel the downside is limited at least for now. However most important supports for Nifty is 5260 to 5160. For any reason, if this breaks, the Nifty will immediately lose 400 points more and can go down all the way to 4760. That would be around 16,000 sensex (our annual target for sensex).
Similarly, for bank nifty a very important support is at 10,240-10,100 range. If it breaks this range, it can immediately go down to 8786.
But I do not subscribe to this view. I am more bullish than bearish at least for this month.
There are two reasons for this:
First, In March, the Domestic Insurance Companies are big buyers. LIC alone is expected to be an investor of around 15,000-20,000 Crores in Q4 and large part of that comes in March alone. Almost half of this amount can further be added by Private Insurance players. That means we are expected to see around 10,000-12,000 Crores of buying by Insurance Sector alone during March.
Just to give idea about how big is this amount: FII's net selling averages at around 500-700 Crores per day for last few weeks. That means in March alone, the markets can absorb another 20 day's FII selling comfortably.
With FIIs selling off already 10,000 Crores and there is no reason for markets to go down except the temporary crude crisis, I dont agree that they are planning to sell another 10,000 Crores in March !
So, thats the comfort in back of my mind for March month alone.
Second,
After 13 weeks of fall we have gone up 2 weeks. Now, it is not convincing why the pull back would get over in just about 2 weeks. We are not going down for any fundamental reason. Except Crude there is nothing disturbing. And the moment Crude goes below 94-95, it will start falling again, which will bring strong rally in markets across the world. And there are reasons for that. OPEC has enough idle capacity to compensate for Libyan production. So I feel, it is more of speculative crisis rather than real crisis in Crude.
This 13 week's fall can get extended to 21 weeks (6 more weeks) only if there is an incremental serious bad news - say if the geo-political tension converts into a serious WAR between Gulf and US.
My best estimate is that we will have a pull back for at least 5-8 weeks (2 weeks over). In this, we can go up to even 6,000 of Index, before falling for last leg.
2. Which are the potential targets on the upside, where we will meet the selling?
In case of Nifty, we will see a strong resistence between 5440 & 5490. Similarly, it will be tough to cross 10,919 on the bank nifty. My estimate is that we will first go up on the bank nifty to around 10,900 levels and then may come down to 10,600-10,500 levels.
In all probability we may see bank nifty coming back to 10,500 levels only after RBI policy on 24th March.
But what is important is, although I am more bullish and less bearish, the Nifty levels of 5440-5490 are to be watched very closely. If the markets comfortably cross these levels, we can confidently say that we are going towards 5700-5800 levels during March itself.
Thats all for this week. Wish all the Market Watchers Best for their trades and investments.
Do give me your feedback about my blogs on bhuvan.singhi@gmail.com
