Nifty Today’s Trend, Prediction, View, Target 21st Dec
Nifty today’s trend was bullish from an intraday perspective. Nifty opened gap down following FED raising rates and S&P 500 closing in the red but that is not the important take away. The important take away from the all important FED meeting is that rates will keep moving higher even in 2019 and FED is guiding for two rate hikes in the coming year so that simply means that equities will be less favorable asset class unless and until prices fall to great levels that was my understanding from what the FED said.
Now back home let us see what Nifty is telling us. Let us once again recap of what took the Nifty higher from 10000 levels. There were three major factors which supported the rally from 10000 area to my target area of 10850-11050 and they were stable rupee (rupee pullback as predicted from 74.50 to our target of 70-69) the Brent crude oil which was higher at 86 has now cooled off a good 30% from the highs and that was also predicted by us and the third factor which supported the rally was Indian bond yields which we had clearly stated is heading for some decent correction so all these factors are supportive of an equity rally and they have done their respective bit in supporting the Indian stock market to move higher from 10000 to around 11000 levels.
Now, from here on we see that the best of the selloff in Crude oil, stable rupee and lower bond yields are in the price and now as these instruments once again start bouncing back and moving higher they will start acting as a head wind for the Indian stock markets. In addition to these factors earnings will be a major challenge and as the economic growth slows into the next few quarters markets at around 11000 levels looks richly priced and above this you can surely add the General election of 2019 uncertainty which till a few days ago was a foregone conclusion is now looking wide open so the market till a few days back was assuming a stable Govt in 2019 but that could go the other way. In addition to add to these issues there is a fresh problem of farm loan waivers so there could be some serious dent to the fiscal policy and after the loss in state elections we do see many State Govts and may be even the central Govt being forced to move to populist measures and that will not go down well with the market looking at the manner in which Gujarat and Assam Govts have moved it does look very likely that other states and central Govt will also have to move in a similar manner so the fiscal deficit problem could once again come to haunt the market.
So this is the cocktail that we are facing as of now to sum it up low or no earnings growth which at 11000 for Nifty markets look richly valued, Crude bouncing and moving towards 68 Brent (just a bounce after a major decline not a fresh up trend), Rupee moving towards 75+ due to Dollar Index moving higher and fiscal slippage in India, No certainty of a stable Govt on 2019, Bond yields bouncing back, technical resistances around the area of 11000 give or take a few hundred points and in such a back ground sentiment on the street becoming very bullish and talking of targets of 12100 so all these factors to my mind don’t go down too well and hence as per my analysis we suggest to keep booking profits in longs on the portfolio front and get into cash as much as possible because in such an environment we could see a sell off and how much cheaper stocks could get is anyone’s call but the other point is that from current prices it is very unlikely that equties from current prices will make much or any money. I am not talking about individual stocks but the portfolio as a whole so keep that in mind. As usual if you are only trading on the basis of this post please use your own risk management, always keep your risk in check and please do not over trade. As per my prediction, view we dont see much upside from current levels and for the time being our targets are have been done.
Good Trading To You!