Sunday, November 1, 2015

Next Sunday will be Trend Decider

The markets lost about 2.8 pc for the week., it has already corrected about 300 points from the top on the Nifty without anyone even realizing it. The Bihar election results are due on next Sunday and that will be the tipping point.

1. Bihar elections will throw up only 2 possibilities, either the NDA or the Nitesh led front wins. If Nitesh and company win the markets will anyway tank and if Modi wins there might be a surge but eventually the markets should correct.

2. I see Yes Bank at levels where it was when the markets were at 7800 and now we are still at 8000 plus levels but Yes Bank as corrected. Banks are usually Lead Indicators of an impending correction in the Nifty.

3. The markets typically peak around Diwali and the euphoric atmosphere is generally used to reel in the last few suckers left. In October 2009, there was a sharp 2 week correction from 5181 to 4538, a correction of 12.5 %. If we extrapolate this now, 12.5 % correction from 8338 will bring us to 7295.

4. The markets are a cesspool of multiple factors. Every buyer and seller thinks he is buying at the correct price. The FII flows continue to remain iffy and I see no great traction in the money flowing.

5. The Cafe Coffee Day and the Indigo IPOs have sucked out a great deal of cash from the markets. IPOs typically occur at the peak of Bull Markets. Remember Reliance Power in 2008. The markets tanked even before the stock listed.

6. IPOs, election results, Diwali peaks all these make a very interesting time for the markets.

I would not put in any fresh money in the markets just churn the existing cash around. I still stand by we visiting 7200 and 10500 within the next one year. What will come first? My model says 7200. Models can fail so we may well see 10500 first though I would put the probability at 20 pc.

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