SGX Nifty 3rd Oct 2016

SGX Nifty

LTP  8,576.00   -128.00   -1.49% High 8,710.00 Low 8,546.50

SGX Nifty

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SGX Nifty 3rd Oct 2016

SGX Nifty / Nifty Futures fell hard this week and has given a faster retracement below the last rising segment. As per our analysis we do expect volatility to continue as we have mentioned in our last update.

The all important Reserve Bank of India policy meet is scheduled on 4th Oct 2016 when the new RBI Governor Dr. Patel will announce his maiden policy. There is a lot of talk about how Dr. Patel is under pressure to cut rates and how some people from north block have told him to cut rates very aggressively but most people are missing the point here.  Reserve Bank of India has been well ahead of the curve in terms of rate cuts.
It is the Banks who have not passed on the rate cuts due to mounting non performing assets and the other main factor that they are not getting sufficient depositors at current rates. At the end of the day the banks are a function of getting deposits at x rate and then lending that money at y rate but as per the data we can see that banks are not getting sufficient deposits at current rates, this has been one of the biggest problems and hence the rate cuts from the RBI have not been passed on by the Indian Banking system but still some people feel that rate cut by RBI will boost the economy.
In our view RBI even if cuts rates the transition of that will not happen at least in the near term so what the RBI does in the near term frankly will not matter beyond 4th Oct 2016 in terms of the real economy but from a stock market perspective lets analyze what we see in store in a proper analytical manner and not wishful thinking. Mind you that my view may not concur with some of the readers here but still we will tell you what we have analyzed.

The CPI inflation reported last month was the first lower tick that we have seen in 6 months. In simple words CPI inflation has risen for 5 months out of the past 6 months, if we look at the WPI inflation it has been rising every month for the past 6 months. As far as we know RBI will have to take these numbers into account before they cut rates. The inflation data which has been reported over the past 6 months does not give any room to the Reserve Bank to cut rates at least for now. So in the upcoming policy despite north block wanting the Governor to cut rates we do not see how will the Governor move in spite of such sharp rise in inflation data so let us now come to the next part of the RBI meeting which will be the commentary by the RBI and in this we do expect that Governor will sound very neutral in his talk. So effectively we will hear that policy rates will be a function of data which is being reported. Further on a personal note since Dr. Patel is know to be very close to the out going Governor if he for any reason cuts rates will not hold Dr Rajan in good light so even on a personal note Dr. Patel will not cut rates as per our analysis. For those who say that 0.50 Bps rate cut is coming on 4th Oct 2016 we say that anything is possible if irrational decisions have to be taken then why 0.50 Dr. Patel can even cut the policy rate by 200 Bps as one of the leaders from current ruling party mentioned in a interview but knowing Dr Patel and his team we have observed that he is a rational person and not the one who will take orders. He will stick to the data and we expect that the upcoming policy and the ones to come will always be data dependent and not based on wishful thinking.   In addition to the current inflation data not allowing Dr. Patel to cut rates there are other factors also. The first is dollar bonds which are about to expire will put pressure on the Indian Rupee the term for withdrawal will begin in a few days from now in addition to this FED will also be moving rates higher by 0.25 Bps on 2nd Nov 2016 and this will further put pressure on the Indian rupee, with two already big events in the next 30-60 days we do not think that it will be a wise decision to cut rates and further put pressure on the Indian rupee in the near term (there are a many other factors also which indicate that rate cut will not happen but we will not get into those for now)

Let us look at the next important event that happened a few days back. The massive breakout in sugar in international markets. As per our analysis we see that sugar prices are heading much higher from current prices and locally since the festive season is about to start this will add to the demand factor for sugar and we expect the net result of that is to see sugar prices moving higher, in the retail market we could see prices of around 60-70 Rs/Kg and that will help the sugar companies who are holding good sugar stock like Ugar sugar.  We maintain our positive outlook on all sugar stocks and we reiterate that on dips traders can still accumulate Ugar sugar, renuka sugar and bajaj hindustan. We see that all these stocks will do very well in the coming time and by april 2017 we could see these stocks at much more higher prices from current levels. Please note that we do not recommend to buy only sugar stocks but keep in mind that these stocks mentioned here will do very well in the coming time. Internationally sugar prices in the near term could see around 30$ and that is not the final target we see that sugar prices internationally will even move more higher that those levels.

In our last update we had mentioned that crude oil and silver will do very well and they also have performed very well. Longer term we are very bullish now on crude oil futures and we see crude oil futures nearing to 60$/bbl mark. The bottom line is that the trend has turned up in crude oil futures corrections will come and go but overall prices will keep trending higher. the ideal strategy is to buy into panics sure we could still see one round of panic in crude oil which could take it to around 43-41$ area (not necessarily but possible) so if that is the case then buying and accumulating into panics will be a good trade. Silver also we see the same. Longer term trend is now up and we are not in the camp which feels that prices are headed lower to new lows. As per our analysis a fresh bullish trend is on for now.

Coming back to Nifty Futures the trend as per our analysis is down. Pullbacks will come and go and some sharp pullbacks also are possible but we do not see those pullbacks sustaining and markets could behave in a negative manner in the coming days with sharp pullbacks and hence trade as per our your own system with appropriate risk management. If you are trading only on the basis of this post please use proper risk management and then only trade. We may take a trade even against our view given here during intraday or may choose to do tactical trades and may not report them here. We may choose to report or may choose not to report those trades. Please do not think that all trades and multi baggers that we trade on will be reported here free of cost. Please keep this in mind. Nifty will be very volatile in the next few days and sharp movements on both sides will be seen so please be careful. Jupiter has changed house and moved to Libra and as per its current behavior it indicates uncertainty so since Jupiter represents expansion expect massive volatility in the coming days and sudden moves that could start out of now where. In such a time it will be best to only follow and takes trades in the direction of the main trend and avoid any counter trend trading.  Astro cycle indicates there could be some sudden moves in the next 4 trading days. Be careful.  Wednesday Mars in Capricorn makes a square to Jupiter in Libra and that will add to the amplification of sharp moves. Yesterday was the new moon in Libra and that also is a important astro signature. The price action seen on Monday especially the US markets on Monday will indicate a great deal about how the next 15 days will be so lets see what happens on Monday in the us markets.

Good Trading To You!

73 thoughts on “SGX Nifty 3rd Oct 2016

  1. thanks for updation. beautiful explanation about evrythng. just one thng sir u talk about volatility markets were volatile from last week so but what about collapse. in last month u said the collapse is imminent. please give ans

  2. Hey Glen,

    can you please advise how faster retracement has happened on downside..8540-8968 has taken 8 days and move from 8968 has already taken 14 days but didn’t break 8540..or do u see rally from 8540 as triangle and you talking about faster retracement of E leg of triangle.

  3. Excellent explanation. Thank you dear Glen. This is a very mature and lucid communication to your readers. Appreciate and expect this tone to continue even your reactionary comments.

  4. Sir as of now it looks good to hold nifty with put Friday US market done good so nifty may bounce 50-60 points nifty done time correction n value correction
    So may this time attempt to climb 9000+

  5. Sir,
    Thanks for the detailed update. The big thing discussed these days is Deutsche bank. Do you see any surprises coming from there because if it does it can rattle the complete stock market environment.


  6. Sir,
    You are writing 2 Nov as fed rate hike date so that must be by your thorough analysis. But don’t you think fed will try to increase rate in Dec instead of November as November is the election period and any such move by fed will be seen as a political move?


  7. Good trading.

    Will have to disagree on your opinion on how rate cuts and transmission works, oversimplification but apt for the audience.

  8. It was one way run on the upside today. Missed chance to book my short position below 8600. Today move can not be termed as pull back since it crossed previous high. It was clear buy looks for further upside till 8800+ level.

      1. Hi Manish,

        If you see my previous post I mentioned to cover any short around 8600/8550 levels. This pullback was clearly visible. Also Nifty will not break 8530 very easily. Ideal case would had been to cover short at 8600/8570 and again enter the shorts fresh at 8750 levels.


        1. Finally 8530 will be broken as said by Sir but atleast in the last move it did not seemed that it would broke. So as sir has said, we should use our own risk management. Trend is down that’s for sure.


  9. Sirji, zee TV, ceat TVs motors super overbought. IOC bpcl negative divergence on RSI 14,9. Is it better to go shorts on overheated counters than to do bottom fishing. I think the time will come when we can get scrips at lucrative prices. The international markets are at top of yearly b b and will not press ahead too much. Indian markets are very fragile as we saw on Thursday.

  10. Anpat,
    Yes, i do remember your suggestion on day market hit 8555 level but was fully convinced that it will break 8550/8500 level and will go deep down however it bounced back and i lost all the gain i had that day.
    Still holding short in hope that bounce is no more than 8750. RBI policy is the key, lets see no point of exiting short at this level now.

    1. 8570-8530 is crucual level for markets. If broken we may see a sharp fall till 8088/7930 levels also. But to break that will require some extremely bearish news. As mallav Sir has said the astro cycle is negative that’s possible but as of now atleast looks difficult. Things can change very suddenly though like we saw last Thursday.


  11. Glen,
    One more thing as per your post, you mentioned that Monday US trade will be the key. US market is in red now so accordingly to you next 15 days trend RED. is it? No more pull back?

  12. Very Very nice writeup…keep it up Sir…and thanks a lot…You are an inspiration for us to think and increase our knowledge..
    Thank you once again…

  13. Taken a short trade today in one of the psu bank, markets and psu banks look overbought. Let’s see how things go, hopeful to wipe out remaining F&O losses by this trade. I think markets will face stiff resistance at 8770/8830 levels. Your views please.


  14. Surprise ! Surprise ! Surprise!
    RBI cuts 25 bps. Where will market go now? What is the key now to trigger down move? Dont think anything else other than war can trigger sell off.

    1. Don’t underestimate the doutche bank issue. If it makes any negative headlines it will lead to a horrible sell off.


  15. Sir,
    You had mentioned 5th Oct astro as amplification of trend. So amplification of the minor trend which is up will be seen or amplification of major trend which is down will be seen.


  16. SIRJI, i think IGL HAVELLS CEAT AND TVS MOTORS are overheated counters and i m waiting tomorrow to do short trades. i did short trade in zee tv, ceat and tvs motors with good success. according to EW study, these 4 are at the fifth and furious wave where good amount of longs will be made before exhaustion. IOC BPCL CEN.TEXT HINDZINC ONGC AND UBL are other overheated counters. SIRJI, is it possible for nifty to touch SAR and erase the FALLING WINDOW it had made on 26 sep at 8809.55 and since it has taken 3 days already ad tomorrow being the 4th day for the SAR to be broken, i think markets will then go down for next 3 to 5 days till nearly the SAR at the lower end? EWstudy at this junction is confusing. at 8810, i am thinking of buying one 8700 put option

  17. Mr.Glen do u still feel great collapse in world markets?
    Rbi just cut rates by 0.25 basis points and excess liquidity which was in the world markets already is now one step pluss with more liquidty from emerging markets like India.
    Just want to know if you still have that strong beleif for a fall, as now there are maasive buying opportunities in certain sector.
    Would like if you share your views thanks.
    God bless.

  18. Now after Monday even after opening positive US market is in negative on Tuesday. So it’s going the way you think.So do you think collapse is on the way before Diwali ??

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