SGX Nifty Futures
(Change Vs Today’s Nifty Futures (NSE) Closing)
Nifty Futures 17th March 2017
Nifty Futures / SGX Nifty has continued moving higher over the past few weeks. As per our analysis, we once again reiterate our view that these are not prices to buy and these are prices to sell. Overall no one in the history of the stock market has made money by buying at such hefty valuations and the important point to keep in mind is that these valuations will not come lower in a jiffy. It will only come lower with significant price damage on the downside as we do not see earnings to pick up in the near future. At a trailing PE of around 24 no one has even made money buying in the market so please keep that in mind. We know there are some people who will say it is not important to see trailing PE and rather we should be looking at forward PE but the history of forward PE is way too bad for a case in point at the beginning of this year most fundamental analysts were talking about 15 percent growth but as of now we are nowhere near to that projected growth so once again it has been a big miss hence it is always prudent to follow trailing PE which has been a great benchmark.
It is not only the valuations that are a very clear sign of a market collapse in the coming time, there are many other indicators too. Let’s look at the sentiment indicators. Each and every person on the street is bullish. In the worst case scenario, everyone expects 8700 levels and nothing lower than that and on the higher side, it is a Conesus that Nifty is heading towards 9500 first and then 10500. In 2008 people went all out and bought Reliance Power IPO and now people have bought Dmart IPO. The oversubscription levels are a clear indication of the euphoria that is present on the street. No of new trading accounts being opened is also at almost a 6 year high with most of these accounts being from the retail segment. All these indicators are a clear sign of froth on the street and whenever there has been froth there has been a great correction. To put it in simple words for every great hero there has to be a great villain and that is true for the markets also. So for every great fall in the markets, there has to a euphoric rise and that is what we are witnessing in the markets as of now. The million dollar question is how long will this go on because the news flow that is coming in is actually negative for the markets. On Monday WPI numbers were at 39 months high and yesterday FED did move rates higher but yet the markets have ignored them (another sign of a bubble formation) but we do not think that the markets will be able to ignore them for a longer period of time. WPI numbers mean that RBI will have to start moving rates higher if we get maybe one or two higher inflation numbers and that in turn will be adding to the NPA problem which as per our understanding already is forcing banks to take hair cuts and restructure loans and further credit growth is not picking up.
The most important of all of these is that it is not now that we are predicting a down move we had very clearly mentioned in our Diwali update that
“I do not suggest buying any stocks for long term at current prices though we may enter in some panic and exit again but that will be trading not investments”
“In the history of the stock market people have not made money buying at such hefty valuations so I can not understand how this time it is going to be different but anyways that does not matter brokers will get retail and even most of the readers of this article to buy and buy heavily but we do not suggest to buy at all”
“During this move down we will have one sharp pullback that will trap most traders in long side trade please be aware of that. Once the long trade is done it will be business as usual and mayhem will be seen on the streets”
As you can see we had clearly predicted the current move well in advance and it is not that now we are saying a target of 5872. Bottom line is that Nifty is about to begin a crash cycle and that will take all the bulls and the retail guys by surprise. We do not suggest to hold any longs in the market for now and once again remember that after the mandi cycle India will outperform no doubt about that but before that we see a crash cycle which will start very soon it is only post that crash cycle will the mother of all bull markets begin in which we see Nifty touching 23800 also. At 7900 were saying time and again that although we see 5872 we do not see that coming straight and now that time for up move is over. People are fully invested and all the positive news is in the price.
Many of you keep asking me as to what news flow will trigger the markets lower. The point is I do not know what news flow will trigger the market lower. Even very recently at 7900 when we said to buy portfolio most of you asked what news will take it higher well the point is market discounted the news well before the event and that is why we did see an up move from 7900 and in a very similar manner market will start crash cycle now and the news flow will come in later but I do not know what the news flow will be. It could be the FED raising rates two times in June and Sept or may be some Trump policies or something else. The bottom line is that wave and Astro cycles are clearly indicating a panic cycle which will begin and decimate all risk on asset prices. The only way to make money in this year as per our analysis is to trade on the sell side. Do not buy stocks with the exception of sugar stocks for now and be on as much as cash as possible. Please keep in mind that if you are trading only on the basis of this post please use appropriate risk management and then only trade. Please never over trade.
Good Trading To You!