Nifty Today’s Trend, Prediction, View, Target 13th June 18
Nifty today continued to move around the 10800-10850 levels along expected lines. As per our analysis view and prediction Nifty trend remains down and is about to make another lower top and post making the lower top we expect the main trend which remains down to resume. There are many traders who feel that Nifty is heading for a target of 11,000 or higher but we do not feel so neither from a fundamental perspective nor from a technical perspective. Let me try to explain part of it today.
Some of the investors have been constantly asking me is this the right price to buy and hold some stocks, the answer to that as per my analysis is still NO we do not see deep value available in most stocks for now and we say that because valuations have once again reached the peak levels seen around 29th Jan 2018 though there are many stocks and especially mid caps and small caps where valuations have come off from the highs but the real problem for those mid cap and small cap companies is that there is no earnings visibility and low or nearly no earnings growth and the rise in interest rates are further going to dent the PAT for these companies as cost of capital will increase the net interest burden for those companies and hence investing in them just because they have come off from the highs as per our analysis and view remains that of avoid for now. As we have been guiding that large cap or Nifty 50 valuations have never given returns or any investments above the PE of 24 have historically never given any returns and we feel the same this time also. Currently the Nifty 50 PE is around 27.50 print and 27.83 real time adjusted trailing earnings. This simply means that earnings overall for Nifty 50 basket are contracting Q on Q because we were more or less at similar valuations when Nifty made its top of 11171 around 29th Jan 2018 so in an environment where corporate earnings are contracting rather than growing we do not see any merit in buying from an investment perspective although we know many brokerages and investment consultants who will keep telling you that keep buying and deploying cash on every dip under the assumption that earnings growth will happen next q onwards but the fact remains that for the past 4 years earnings growth has been elusive and in such an environment where earnings are contracting and valuations are almost at 30 year high we do not see any merit in buying into the market until and unless we do not see deep value which to our mind is still sometime away.
From a technical stand point it is important to understand that Nifty made a high of 10930 on 15th May as per our prediction and then made a near-term low of 10419. The fall from 10930 to 10419 was in 5 trading days while the pullback that has started from 10419 till today has taken over 14 trading days which is clearly more than double that of the time taken to fall in fact is almost 3 times more time now, in addition to this when we see the advance decline ratio for the overall Indian stock market we see that there are just handful of stocks which are supporting the Nifty / Indian stock market which means in simple that the rally is becoming more and more narrow by each passing day and this is not a sign of bullish stock market, if we then take a look at the volumes on the pullback they are also substantially lower than that of the traded volumes on the down move, further if we take a look at RSI charts, RSI is clearly making lower tops and clear divergences are present in daily and weekly RSI charts, same goes with divergences on some of the other major indicators. Besides this from a wave perspective we see that there is significant overlapping taking place and that too is a sign that the main trend is down. There are many more technical parameters which are clearly indicating that main trend is down so we once again are cautioning that avoid buying and be very alert. 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 while trading. Detailed analysis has been sent to our clients via whats app with images which are self explanatory.
Good Trading To You!