So many of you have been asking me where are we heading as far as Nifty is concerned in the coming months. Frankly, I am not bullish at these levels and though the index has been staged managed, and manipulated to come higher most of the stocks are much lower from where we have got out. Yes, the HDFC Banks and the Icici banks that we owned have moved ahead from our prices by around 10% but we did make overall 55% on our portfolio this year and we are very happy with that return our game plan is now to protect what we have made on the portfolio front but be that as it may most of you are reading this post to know where I see the Nifty or what is my Nifty prediction for the next few months and I am putting this out here.
I am not bullish from current levels for a variety of reasons ( however I am not short yet either) first and foremost is that there is no earnings growth supporting the markets historically any big advance in stock prices is always supported by the tailwind of earnings growth however we have been seeing a steady contraction in earnings and the outlook going forward is not encouraging the data points that we look at are not suggesting any major recovery on the ground which means that eventually earnings and next few quarters we will see further slow down in earnings or may be further contractions in earnings will come by over the next few months so in that sort of background we do not see how these hefty valuations will get justified over a period of time be that as it may there is a bigger problem for the sustainability of these valuations and that is inflation. Most people have not looked at inflation numbers closely and if we take closer look inflation has been rising especially food inflation over the past few months and if we sustain inflation around 7% eventually RBI will be forced to start raising interest rates so now look at the combination of hefty valuations + money or interest rate cycle starting to rise the combination of these two factors will take nifty lower much lower from current prices yes there will be some stocks that will outperform the fall but broadly most stocks will be much cheaper from current prices and this is exactly what the bond yields are suggesting an Indian bond yield breakout above 5.95 would mean that we have made a bottom in the interest rate cycle so as of now the broad market expects interest rates to remain lower and that will keep fueling this rally however leading indicators are suggesting a different story for now.
Also, many have been asking me a pure technical outlook, and purely from a technical standpoint in wave theory we are in an irregular wave B and the implications of that are dangerous I won’t put the details out just yet but keep in mind that if my reading is correct most people will be stunned by what happens in the coming weeks as far as prices on the screen are concerned our initial targets for the next 6 months are at 9511 subject to some conditions being met but for now we will take a projection of 9511 and then we will review at 9511.
So where should we see growth and like I have been extremely bullish on silver for the past year since 38K (we did buy got out out at 78K and now again looking to buy) I would recommend once again buying silver in a panic we should see good upside over the next few months or by next Diwali. To my mind and calculations buying silver should be one of the best trades in the next few months.
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.
God bless and have a great year ahead.