Sunday, December 25, 2011

Holiday Season Kicks in

The markets recovered from the early week blues to settle about 1.3 pc up and close the week with mild gains. The coming week is the expiry week and there are several reasons why the markets will close up for this week too.

1. It is the time for the year end bonuses and NAV reporting hence I do not expect any weakness i the markets. US and European markets are closed on Monday, thus giving a field day to the operators to take the markets up a bit. All in all it should be a flat to a positive week ahead.

2. Expiry should be above 4700 and closer to 4800. This is what the Open Interest data is suggesting. 4700 calls were unwound early on in the week giving an indication of the road ahead.

3. Taking Elliot waves into consideration, this could mean Wave 1 from 5400 ended at 4532. This could be an alternate count. If this is true then we are in for an up move of a couple of weeks and the markets could test 5050-5100 band again.
If we go by the original count,
wave 1 was 5400 - 4720 = 680 points
wave 2 was 4720 - 5099 = 379 points
wave 3 sub wave 1 ended at 5099-4532 = 567 points
Wave 2 should end at above 4815, 4882

Wave 3 sub wave 1 took about 9 days and the up move should end in about 6 to 7 days out of which 3 days are done with.This shows the up move to continue till about this expiry.

Now the last up move was 379 points. 4532 + 379 = 4911. Any move above this indicates that this up move will continue for longer than expected and it was wave 1 ending at 4532.

4. 4800-4810 has both the 20 EMA and 20 SMA which would act as resistance. It is also the 50 pc of retracement of fall from 5099. This makes 4815 a very significant resistance.

5. The overall trend is down and bounces could end in the range of 4900-5100. Only a break of the trend line joining all tops from 6339 which comes between 5250-5320 depending on which time frame one selects can signal a new bull line.

6. The dates for the elections in 5 states are out. Expect policy paralysis to continue till the end of Feb.

7.Anna Hazare agitation kicks in from Dec 27th and also the Lok Pal bill will get introduced in Parliament on that day. This can be a dampener for the markets.

8.Muthoot NCD has got an attractive rate of interest of 13.25 %. This is an interesting offering. On the face of it, looks pretty good. 2 years is not a long time frame and also Muthoot have very low NPAs of 0.58%. They will offer you Rs 64 rupees loan if you pledge gold worth Rs 100. This also means even if gold falls 30 pc from current levels, Muthoot is well protected.

9. Another way of playing it is that Muthoot NCD gives you a total of 27 pc absolute return in next 2 years. Instead of Muthoot, buy a gilt fund which should give you a return of 20 pc in next 1 year and then lock in that amount at say 8-9 pc which should be the FD rate in 1 year time frame. Same returns but much more safer.

Next week will be a quiet week with 4650 and 4820 the range. Play safe. Those interested in individual stock picks we have Lakshmi's Cherry Picks.


  1. Nishit, Could you pls suggest Good Gilt Funds.

  2. In addition to gilt funds, Tax free bonds being issued by NHAI (starting Dec 28 2011) make a case for good investment choice. Specially for those looking for long term debt instrument.

  3. Birla Sun Life Government Securities Fund is a good option