The title of this Post (with apologies to Lord Tennyson) seems to aptly describe the current Investment Mantra. As all of us are aware, Markets have rocketed in this calendar year. Much more than the Indices, the broader Market has brilliantly outperformed with certain Stocks in the Infra/ Realty/ Banking space running up by as much as 60 to 100 percent from their November-December 2011 lows.
A lot of investors have started taking the Market momentum almost for granted and it is obvious that the first signs of complacence are just about beginning to creep in. Even though one does not argue with the Ticker, the unfolding situation calls for a bit of caution.While it is true that the months of March-April 2012 would almost certainly bring the first repo rate cut and also may indeed bring some positive movement on the Economic Reforms Agenda alongwith some steps to rein in the fisc as well, but retail Investors cannot take the continuance of the liquidity gush as an absolute given. This implies that Investors would now need to firm up their idea of Stock Support levels as much, if not more than, the Stock resistances that one was used to tracking in the upward trending Market of the last month and a half. The immediate real test will indeed come if and when the Market takes a dip for three or more consecutive sessions.
markets have to break above 5450-5500 to confirm that they are out of existing downtrend. otherwise it is just another of those mean reversion rallies that take place in a downtrend. this pattern of nifty is very similar to the one observed in the begining of 2003. also whenever a market bottoms out, it usually consolidates for a long period of time (i.e. moves sideways or forms U-shaped bottoms) and then begins it's uptrend. nifty has formed a V-shaped trend reversal pattern.
ReplyDeletethe region between 5200-5330 has very little resistances or supports. in the past (one in august and other in october end), there have been gaps formed in this region which indicates that there is a free run in this zone. i think 5330 will be an important support for the nifty. last week it had tested this support on the first two days of the week.
the additional supply of liquidity will go into those markets which have not rallied as much as the indian market has rallied. the valuations in india are much more expensive than some other markets in the world. for eg. chinese markets are at much cheaper valuations than their indian counterparts. indian markets are at P/E multiple of 19+ while chinese markets are at 14+ levels. hence this liquidity injection by ECB (LTRO) may not benefit expensive markets.
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