The markets gained about a 1 pc for the week on the Nifty and continued trading in a range. This range bound trading has gone on for several weeks and will soon lead out to a breakout in either direction. Let us try and examine the various possibilities both technically and fundamentally.
Fundamentals:
1. The Government is pushing through the Divestment program. LIC has been allowed to buy upto 30 pc of a company. It was 10 pc earlier. This coupled with the news that LIC plans to invest 25000 crores in the equity markets in the remaining 4 months. LIC will be forced to puck up the stakes in the divestment program which also means that LIC will not shore up the markets. This makes the market more dependent on the FIIs.
2. The RBI credit policy review in Dec-Jan may cut rates. Gilt funds are looking great for investment right now. In the past 1 year, the Interest Rates have gone down by about 0.5 pc and Gilt funds have returned about 12-13 pc returns. I expect the Interest rates to go down by at least 0.5 pc in the next 6 months.
3. Gold has quietly gone up to 1751 dollars to an ounce. Any close above 1800 USD will lead to a breakout and at least 10 pc price appreciation in the price of Gold. The rupee has also weakened to 55 to a dollar thus increasing the price of Gold in rupees.
4. Eurozone has gone back into Recession. If one looks at my older posts, I had spoken of a W shaped recession worldwide. Europe has already gone into the W shape, with the US following it if the fiscal cliff is not resolved soon.
5. The equity markets are waiting and watching for the Winter session of Parliament. I expect no reforms to be done till December 20th till which points the markets will drift. Reforms will follow only after the Parliament closes.
Technicals:
1. Technically, we are in the 4th wave down from 5815. We are correcting the rise from 5216 to 5815. This 4th wave has completed a from 5815 - 5583, b from 5583 - 5777 and leg c is in progress.
For the leg c, c-x from 5777 - 5548, c-y 5548 - 5643 and ongoing.
Once, 4-c-y is complete we will have the last leg 4-c-z to end somewhere between 5400 and 5525.
This sets the stage for a downward market till Parliament is in session and then for a new year rally, culminating in a major top around 6000-6200 region.
Fundamentals:
1. The Government is pushing through the Divestment program. LIC has been allowed to buy upto 30 pc of a company. It was 10 pc earlier. This coupled with the news that LIC plans to invest 25000 crores in the equity markets in the remaining 4 months. LIC will be forced to puck up the stakes in the divestment program which also means that LIC will not shore up the markets. This makes the market more dependent on the FIIs.
2. The RBI credit policy review in Dec-Jan may cut rates. Gilt funds are looking great for investment right now. In the past 1 year, the Interest Rates have gone down by about 0.5 pc and Gilt funds have returned about 12-13 pc returns. I expect the Interest rates to go down by at least 0.5 pc in the next 6 months.
3. Gold has quietly gone up to 1751 dollars to an ounce. Any close above 1800 USD will lead to a breakout and at least 10 pc price appreciation in the price of Gold. The rupee has also weakened to 55 to a dollar thus increasing the price of Gold in rupees.
4. Eurozone has gone back into Recession. If one looks at my older posts, I had spoken of a W shaped recession worldwide. Europe has already gone into the W shape, with the US following it if the fiscal cliff is not resolved soon.
5. The equity markets are waiting and watching for the Winter session of Parliament. I expect no reforms to be done till December 20th till which points the markets will drift. Reforms will follow only after the Parliament closes.
Technicals:
1. Technically, we are in the 4th wave down from 5815. We are correcting the rise from 5216 to 5815. This 4th wave has completed a from 5815 - 5583, b from 5583 - 5777 and leg c is in progress.
For the leg c, c-x from 5777 - 5548, c-y 5548 - 5643 and ongoing.
Once, 4-c-y is complete we will have the last leg 4-c-z to end somewhere between 5400 and 5525.
This sets the stage for a downward market till Parliament is in session and then for a new year rally, culminating in a major top around 6000-6200 region.
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