NIFTY TECHNICAL CHECK UP

After being long since 5500 levels and riding the full momentum, We thought of revisiting the Nifty Technical Set-up and come up with an outlook and possible scenarios on the eve of Modi Government’s Maiden budget to benefit the subscribers, Advisors, Dealers, Investing community and other market participants in large

While there is no doubt, that we are in a “Bull Market” and should stay invested in equities, the only question that remains unanswered is the entry point and timing. Entry point and timing is especially crucial for investors/ portfolio managers who were caught unaware by this tremendous rally and who remained on the sidelines by choice or by compulsion.

Few Technical observations

~ Nifty has rallied exactly 50% from August low of 5119 to recent high of 7700 in flat 9 months.

~ An index giving 50% return in just 9 months after 6-7 years of consolidation tells us something. It is shouting from the top of the roof that the “Bull Market” has started and is here to stay for a longer period of time

~ Nifty has however become highly overbought and has rallied ahead of its time by showing such a tremendous performance

Possible Scenarios’s

~ In such a scenario where Nifty has become overbought and has rallied ahead of it’s time, 2 things can possibly happen.

a)      Price Wise Correction

b)      Time wise Correction

~The Basic tenets of “technical Analysis” will help us to answer the question of the magnitude of Price Wise Correction and/or time Correction. The Basic tenets of Technical Analysis are

a)      The market Discounts everything

b)      Price moves in Trends

c)       History repeats itself

~ We believe markets have very well factored in the “Formation of Modi Government” and therefore are not able to sustain above May 16 highs and hence investing just on the basis of new government in centre would be a repetitive loop which could backfire. In other words we need fresh trigger points for the Nifty to move up going forward...

~ Markets moves in trend and the “Primary Trend” of the market is Positive for sure based on different tools and parameters of Technical Analysis

~ Based on the Charts of Nifty itself, its heavyweight components and Intramarket Analysis, we believe the “Secondary trend” could have become negative. A Secondary trend is a situation in which the broader market, temporary moves in the opposition direction of the Primary trend

~ Post 2013 Dec Assembly elections, markets corrected 7% over a course of 2 months. It took Nifty full 3 months for the Nifty surpass it’s Dec 2013 high

~ We believe this time too, nifty should correct atleast Price-wise or time-wise. The probality of either one of the two events happening is very high 

~ Incase of a Price wise correction we believe Nifty could fall atleastupto 7150-7180 levels where we  believe investors should start pumping fresh money into the equities

~ Incase of Time Wise Correction we believe Nifty could consolidate till last week of July.