The GOOD, The BAD and The UGLY

      THE GOOD THE BAD and THE UGLY

Dear Investors,

Last week we had most volatile trading in Stock markets, Nifty recorded the intra week low of 5690 before closing at 5751 on Friday (Sensex intra week low was 18955 and Friday’s close was 19136). There was greater fall in Mid Cap and Small Cap indices indicating that the broader market is weakening. Though all the technical parameters indicate ‘Oversold’ conditions in the market one has to wait till Monday (Nov 29, 2010) as number of events has taken place in India and surrounding world. A weak beginning to the week can pull the Nifty and Sensex to lower support levels and the drag downward, so one should not take positions before the market settles to a stable level,  

It all depends on response of investors to,

GOOD Events (U.S.)

Strong holiday spending data was reported. Signs are indicating a ‘recovery’ in the labor market. The U.S. government's non-farm payrolls report on Friday (Dec 3, 2010) is set to be another sign of a turnaround in hiring that could boost stocks through the end of the year. In October, companies hired at their fastest pace since April, while the latest weekly initial claims for unemployment benefits have dropped to their lowest in over two years. November consumer sentiment rose to the highest level since June. October consumer spending also gained marginally.

BAD part (INDIA)

As the markets in U.S. were closed during recent carnage in India, we do not know how the investors in the world will respond to the scams and political events in India on Tuesday when they open. The ‘Loan and Bribery’ scam is getting deeper as many companies are getting dragged in by SEBI and CBI. The sword is still hanging on Indian Markets.

The events in Parliament in relation to 3G, events in Andhra Pradesh & Maharashtra and results of Bihar Assembly polls indicate that the Indian Political situation is worsening. It remains to see how world looks at it in near future.

UGLY part (EUROPE)

The worst part of the event is ‘News from Europe’. There is a fear that Europe’s debt crisis may spiral out of control on that background. The declines in European stocks this week had looked "really, really ugly." Even though a financial rescue plan was in the works for Portugal and called a newspaper's report that Portugal was under pressure to seek a bailout "absolutely false", while Spain said it did not need help to manage its finances. But the market was less sanguine and stocks took a nose dive.

The U.S. dollar rallied while the euro slid to a new two-month low amid fears that Portugal and Spain could follow Ireland in needing bailouts to shore up their economies.

SO   WAIT TILL MONDAY………

To See,

What effect will it have on investors inside and out side India will be visible on Monday when markets open.

What psychological effect will be created due to devaluing and postponement of Claris IPO by few days due to insufficient subscriptions. A worry though small, on inland investor sentiment.

Even though Indian economy is to grow by 9 to 10 %, the results of Corporate India are satisfying. There is no doubt that Indian markets were out performing global markets. But how long one can ignore the events around us? Markets are ultimately in correction mode; only thing is to see how far it travels?

Before you jump watch for important land marks for Nifty in coming days:

·         Nifty has closed at 5751, which is just above the important support level of 5745

             (38.2%  retrenchment).

·         Immediate fear is of breaking intra day low of 5690 (Friday)- 5620. If Nifty does not bounces back from these levels then the chance is that it may drift down to the immediate support level of 5560

The resistance for upward move comes at:  5798, 5860, and 5950.

Nifty has to close above 6050 so as to keep medium term ‘Bull Trend’ Intact. Till that time one has to wait for ‘Investment Decisions’.

TODAYS THOUGHT

Markets are a cycle, no rocket science there! But somehow we tend to believe that the market is uni-directional – irrespective of whether is it a bull run or a bear trend! When the markets were at 21000 levels D-Street was full of positive news that markets in a short term will touch 25000 levels. So much optimism turned to a complete pessimism in less than a week. But markets, never grew tired of throwing surprises, which makes even the best of market pundits sit up and watch.

It is not advisable to give buying calls in such uncertain environment so wait till markets take a Direction.

Thanks

Dr. Vasant Bele.

DISCLAIMER: Views expressed are mine. Risk taking is yours.