Terrible Thursday

So, we were hit with one of the most confusing days in trading. The market opened flat to low in the morning and witnessed short covering during the mid of the trading session. Around 1pm it seemed that we might witness the Nifty rise since there were several stocks holding their ground e.g. SBI, Siemens, Ranbaxy, Tata Power etc.

The Chinese markets were weighing heavy on us and hence we saw the cut in the early hours. However once the Chinese markets ended their day we were witnessing short covering which led the Nifty in almost the green territory.

However this was not to last, and before the European Markets opened we were hit with the news of Debt fear in Dubai. You can read more on the same at the below mentioned link.

http://finance.yahoo.com/news/Dubai-debt-fears-hit-world-apf-3624614071.html?x=0&sec=topStories&pos=2&asset=&ccode=

Once this news hit the market there was no looking back, EU opened almost 1% negative and Nifty ended the day down 100+ odd points. There has been no improvement since then and right now the EU markets ended their day down almost 3%+ in the red.

This makes me wonder whether there is still another 1% cut left for our markets or not since both the Chinese and EU markets were down by over 3%. It seems like Thanksgiving has gone terribly wrong for the investors worldwide and the US Investors are really happy that it was Thanksgiving due to which their market was shut.

So whats there in store for us going forward?? Let's understand the current scene to the best of our abilities first

1. Dollar is weakening and seems like there is not much support left for it besides the Holiday season sales in the US. However with the unemployment rate above 10% and employment budgets squeezed I do not think that there is much left to save the dollar at least this year.
2. Inflation risk is rising in Emerging Markets due to which we are going to see credit tightening in the market in the first quarter.
3. Markets have had a huge run up due to free money available in the market but investors worldwide still believe in the India as well as other EM growth stories.
4. Lot of QIPs and primary market paper has hit the market due to which excess liquidity is squeezed out for sure.

Keeping this in mind there are a few options we Indian Investors are left with

1. Buy Gold and wait till we are hit with huge inflation numbers
2. Avoid buying into the Banking sectors since we are going to see credit policy tightening
3. Buy Indian Rs. since we will see credit tightening
4. Equity assets will see some buying interest due to the need for high risk high return

Now that we have established a bit of the macro-economic scenario lets get down to technical analysis.

On the charts, Nifty has strong support from 4775 - 4950 levels on a weekly basis. On daily basis we see support from 4900 -5000 levels which might help the Nifty take a stance in this series. Considering this scenario, you might want to start avoiding high beta stocks and get into defensives.

There are a lot of optimists out there who might need a reality check as per the charts. I believe that as per the charts there is still some correction left in the market. Bank Nifty (CMP: 9067) can be shorted by high risk investors for a target of 8890.

This being our first Market View post, I do not want to sound like a doomsday analyst but want to let all my fellow investors out there to be patient and wait for falls in the market to start buying.

Do not fall prey to analysts predicting 5200 -5400 on the Nifty yet. These levels will come but there is a lot of time left before we see those kind of levels. I also believe that these levels might turn out to be only a shorting opportunity in the market for the investors.

I have taken a look at a lot of charts and to be very honest all the stocks are almost on the verge of breaking down. However in such a liquidity driven market its best to wait for buying at lower levels rather than shorting the market.

For the moment stay cash heavy and wait for the right time to invest. Invest safe and earn more from the markets. Just drop us an email at dewang@denip.in or nimesh@denip.in to subscribe to our weekly stock pick services.

Notes:

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