Sunday, September 6, 2015

Market near Support Levels

The Nifty continued its fall and fell about 4.3 pc and closed below its previous week's low. This is considered bearish but at the same time there is a glimmer of hope. Let us see what the future lies for the markets.

1. I had a comment on my previous week's post "Why do I feel the markets will rise to 10 k in about 1-2 years time when it is falling everyday"

My answer is this is a passing phase. The question is when the dust has settled which economy will emerge stronger. If you look at currency depreciation, India has been the least amongst all emerging market currencies. Low Oil prices have helped immensely in making cash available to the Government. Coal Block auctions has ensured both the State and Central Governments have enough cash flows assured. We have strong foreign exchange reserves.

The seeds of the next bull market always lie in the current bear scenario. Well run companies will always bounce back when the market improves. The FIIs have pulled out about 23000 crores in the last 1 month or so. Yet we have fallen 1000 points on the Nifty. In earlier days, it would have been much worse.

2. Technically, the 7450-7500 zone is always a strong support zone. There are 3 reasons for this:

a. The first leg of the fall was from 9119-7940. This is 1179 points.
This fall has begun from approx 8655. This leg will achieve equality with previous fall at 7476.

b. The high which the markets hit when the election results were announced is at 7563. This is a crucial support level.

c. If we consider the whole rally from 5119 to 9119 about 4000 points, then 38.2 pc retracemnt comes to about 7591.

So many supports are difficult to break and hence a 400-500 points bounce at the very minimum is very likely.

Also, if the markets extend their fall then the next support levels are at 7119 and 7145.

All in all, he old adage goes buy when everyone is fearful and sell when everyone is optimistic could not have been more truer than today.

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