Nifty trend today / Nifty prediction today 19th March 19
Nifty trend today was choppy but towards the end closed in the green. Nifty has moved perfectly in line with our Nifty prediction. We have been predicting higher levels for some time now however we are now at an important juncture so let us understand the entire picture is very critical at this stage and that’s because of multiple factors so let us look at some of the factors at play now.
Valuations have once again become a pain point in the market at least from a Nifty basket perspective. If we take a historical analysis only on the basis of the trailing PE of Nifty in a purely isolated manner then it is clear that Nifty has never sustained above the trailing PE of 27 for extended periods of time sure there have been some euphoric moves around the high PE bands but as of now the trailing PE for Nifty is around 28.01 so from a historical perspective we have always seen sharp falls taking place in the Nifty whenever Nifty has reached valuations above 27. Even the top made at 11700 area was at a trailing PE of 28+ and then we almost did see an 1800 points sharp fall in the Nifty so the point being that regardless of the reasons the common factor seen a trailing PE above 27 has always seen sharp price damage in the Nifty for some reason or the other.
So does that mean that Nifty is getting ready for another sharp decline? If history repeats itself then yes we will see a sharp fall in Nifty but does that mean that the sharp decline has to take place immediately and does that mean that we can’t see the present move or rally extend itself the answer to that is no. There is a possibility that the pre-election rally as many of you are calling it can surely extend a few more days and it is possible that we move further higher than this level also so don’t assume that just because the PE has reached 28 now the top is around the corner. The fall will come eventually based on historical analysis but it may not be immediate and we could see some more euphoric moves in the market in the very near term so keep a watch on the trend of the market unless we see a trend reversal short selling should not be done but at the very same time it will not be a bad idea to from a Nifty perspective to get on cash.
Just like the valuation indicators we have a unique sentiment trend indicator also and as we have discussed in the previous update that sentiment has turned bullish but still is not at the euphoria levels and generally when markets reach extreme euphoria we have always seen a reversal in the markets once again the important point to keep in mind is that it may not be immediate but still the reversals from extreme readings have been sharp so we have two independent indicators telling us that this is not a great area to trade blind and both indicators are telling us to be cautious about the trend and trajectory of the Nifty.
Another important indicator which we look at very closely is time cycle and astrological cycles so if we look at for e.g. some planet x when transits through some xyz sign (I am not getting into specifics of which planet and which sign on purpose) so when that transit takes place once again over the past 100 years we have seen tops or crest formation taking place though there is still some time remaining for the transit to complete itself yet historically this single transit has 95% relation to tops being formed so when the planet moves past the sign the top is in place as I have said this has a 95% correlation to tops being formed so even the time cycle indicator is alerting us about an impending top.
So we have three independent indicators telling us to be very cautious but there are even more telling signs apart from this. So if we look at the next few months there is an election event that the market has to deal with and many believe that the outcome of the election will pave the way for further returns frankly I do not think so because regardless of who comes to power in Delhi the factors discussed above do not change in the near term so as of now the scenario is that markets have fully priced in all positives in the price however has ignored weak earnings outlook as well as the possibility that we may have a not so stable govt in the center and due to this reason overall we do not see markets rallying and the second half of 2019 is going to be even more challenging for the stock market and investors because the slowdown in the economy is very sharp and sectors after sector is reporting extreme sharp slowdown and which means that earnings will not be picking up anywhere in the near term and earnings trend and trajectory will remain flat so eventually the high valuations will give way and we will see lower prices so whoever comes to power still earnings picture does not change and ultimately it is earnings that moves the market and as of now we have fully priced in all positives while the downside remains open so any surprise and we could see some nasty hits on portfolios.
So that brings us to the most important question for the day how to make money in 2019 and which stocks to buy. The answer to that is that we feel and we remain of the view that a buy and hold will not make much money even if you are in the right set of stocks, besides stocks you will also have to look at some other instruments to make good money because it is only if you buy the right set of stocks at the right price and time your exit well only in that scenario will you make money. So you will have to buy into deep value and keep churning your portfolio in order to generate returns. Those who are investing via SIP’s should deploy only on dips so if the markets become cheaper then you buy into the markets however the inverse will have to be done when the markets are rallying and as the markets rally SIP guys should be taking money out of the market and that is the only way you will end up getting some decent returns from your portfolio. Having said all of this there are some select stocks that are at deep value levels and we see them doing very well in the coming time regardless of where the Nifty moves but that universe of stocks is a handful and those set of stocks will not remain at deep value for long and give sharp bounce backs from time to time so look for deep value stocks and buy them and keep churning to get better returns. As usual, if you are only trading on the basis of this post please use your own risk management and then only trade please do not over trade and always keep your risk in check before trading. There are select individual opportunities which will do well no matter what the Nifty does so the idea should be to buy those set of stocks in panic but from a broad market perspective, extreme caution should be taken especially if the euphoria continues for some more time.
Good trading to you!