Nifty Trend, Prediction, View, Target 24th May 18
Nifty Futures today continued its fall and now has been falling for the past 6 trading days in a row along expected lines. If we take a closer look at the sentiment most traders are still buying on dips, averaging their existing long positions and regular readers of this website are well aware that we have been guiding and advising not to be buying on dips but the open interest data is suggesting that most traders and investors are still buying on dips and we do not feel that is the right strategy to go about even now as per our analysis and view Indian stock markets / Nifty Futures is heading for lower side targets and we remain of the view that the damage has just started and there is still a long way to go before we see value in equities and we can only then start investing. Purely from a technical analysis standpoint If we just take a look at the Daily price chart of Nifty Futures / Spot every single day the high is lower than the previous day and low is lower than the previous day. This simple technical analysis basic is showing and confirming what the Indian stock markets are doing and It is very clear that the main trend lower has resumed but still many traders are trying to bottom fish assuming that Nifty Futures is heading for a target of 11,000 or target of new high. Many investors have been calling me and asking me that the stock was at 500 and now is at 300 so we should be buying the stock and my answer to that is no until the valuations do not become cheap or the earnings growth reported by the company does not show stable growth till that point in time we do not recommend buying anything because on a historical basis we have seen that only investors who have bought cheap or bought companies which have been reporting consistent earnings growth have made consistent money.
As per our analysis, Nifty short term and longer trend is down. Our view, prediction remains Nifty is heading for lower targets and buying or bottom fishing .must be avoided at least for the time being. Near-term Nifty spot resistance is around 10600 and Nifty support is at 10400 but we are not of the view that 10400 will hold out for long sure there can be some pullback in the markets I am not suggesting that there will not be any counter trend moves sure they will but as we have been guiding that those counter trend moves need to be used to exit portfolio longs and trading longs so the strategy to be employed should be to sell on rise rather than buying on dips again keep in mind selling randomly on any rise also is not advisable selling only around resistance area on bounce should be done.
Crude Oil Futures will continue moving higher and has been making classical higher tops and higher bottoms as we have been predicting for the past many months now. Many traders are calling me and asking crude oil has been much higher even than current prices so why should the Indian Markets / Nifty Futures react to the Crude oil prices now? Well, the answer to that lies in some details. Firstly I totally agree that in dollar terms crude oil has been higher but in INR terms the best barometer to check crude oil prices is in the MCX. We have a near-term target for Crude Oil in MCX at 5100 which we had openly mentioned on this website a few days back but the more important point is that 5100 Target in MCX is an interim target and eventually we are expecting MCX Crude Oil target to be around the 6000 levels and in such a scenario we do not see how the Govt which is already in damage control mode with regards to the Petrol and Diesel prices as of now will manage the pricing problems when Crude oil finally reaches the targets of 6000 so in a nut shell there will have to be some cut in excise duties both from central Govt and state Govt and also the OMC’s and dealer margins will be reduced but even taking into account all these actions we do not see that Govt will be able to insulate the consumer from any further price hikes so the petrol and diesel price hikes will be passed on eventually to the consumers even after all this management and that will lead to higher inflation, slowing growth and consumer demand because of lower purchasing power and most importantly from a stock market perspective cost of capital will move higher for companies so whatever small improvement that will take place in business performance will be taken away because of higher cost of servicing the capital and loan accounts and that in turn means this. Lower Demand>> Lower sales>>Lower Pricing Power>> Lower Margins>> Higher cost of capital>>bigger than expected hit on the bottom line. These are just a few of the problems that corporate India is about to face in the coming months and in such a scenario historically speaking Equities as an asset class have never done well so keep that in mind and these are just a few of the reasons why we are not bullish on Indian equities as an asset class.
The depreciating INR is also another problem and as we have been predicting that USDINR pair is heading for a target of 72+ and we remain of that view. Indian stock markets have still not factored in the full impact of these headwinds for now but markets will surely start pricing in these negatives like they have over the past few days so be very alert and use any bounce to exit longs for the time being and wait on sidelines. 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 under any circumstances.