FEAR PSYCHOSIS !!!!!!!!

Dear Investors

On 6^th Jan 11 markets started with upward opening on good Global cues. Markets failed to maintain early gains due to ‘Fear Psychosis’ of Inflation, Interest rate hike in near future, Failure of Government in deciding on Fertilizer Policy and rising commodity prices leading to increase in input prices in some of the consumer industries, all this led to free fall of Nifty to the lower levels of 6022, but some of the large caps like RIL, Bharati, Hindalco, TISCO, helped Nifty to close at some what healthy level of 6048

It was ‘Fear Psychosis’ of rising Inflation leading to hardening of interest rates , rising crude and commodity prices led the fall in ‘Rate Sensitive ‘sectors like ,Auto, Reality, Banks, Power , along with profit booking in FMCG and Metals

Threats to markets in future…..

-   Recovery in US, Japan and Europe created the droughts of Liquidity flowing to      the developed Nations leaving Emerging markets short of funds.

-  Rising commodity prices due to increased consumption by Developed markets

- Non stop rise in crude prices leading to inflationary pressure in India

Hopes for the Market recovery….…

-Increased spending in US may lead to better IT earnings

-Better than expected results by Indian corporate

-Better Indian consumption story

- Low HNI (High Net worth Individuals), Retail positions in

-  Market leading to possible ‘Capping’ of the downside risk

- Budget

Technical View

Nifty on 6^th Jan reached high of 6116, which was near to R1 (First resistance level)

Of 6^th Jan (read the blog), went down to 6022 which was S2 (Second support level)

On 6^th Jan. Nifty closed at 6048 which is S3(Third support level)of 6^th Jan. indicating that Nifty is moving in ranges and not getting ruthlessly hammered.

FOR 7^TH JAN 2011

Pivot for Nifty is @ 6062

R1 (First resistance) is @6102

R2 (Second resistance) is @6156

R3 (Third resistance) is @ 6196

Significance

Long positions created at lower levels should be partially booked at each resistance level

Nifty has to convincingly cross 6220 with high volumes to maintained medium term long term trend leading towards all time high of 6330

S1 (First support) is @ 6008

S2 (Second support) is @5968

S3 (Third support) is @ 5914

Significance

Third support level is a last hope for short term traders. Maintaining first support levels should be used to create new long positions to be liquidated at 6115 as this is very strong  resistance to Nifty) One can create fresh longs if Nifty closes above previous top 6137( To be carried up to 6220)

For long term investors third support can be used to create investment positions till

Nifty remains above 5690

STOCK SPECIFIC:

One can buy

TISCO          (Stop loss at 676)

HINDALCO (Stop loss at 226)

STERLITE   (stop loss at 176)

INFOSYS

HCL TECHNOLOGY

BHARTI      (Stop loss at 326)

HUL             (Stop loss at 311)

ITC               (Stop loss at 156)

And few mid caps like

Savita Oil Tech

Jyothi Labs

IVRCL

GMR Infra

Tilaknagar Ind

Piramal Glass

Investment / Positional trade calls

Celestial   Lab.

This stock has come out of long consolidation and given a fresh up move

So buy as a long term investment for targets of 45/55.

V-Guard

This also has completed it downward movement from top of 220 and after consolidating for some period started a fresh up move, may retest 220 and cross over to a new high. Buy for long term.

Company Details, for above two, will be given in Sunday’s blog)

DO NOT PANIC, BE PATIENT

Thanks

Dr. Vasant Bele

Disclaimer: views expressed are mine; take your own investment decisions.

The news letter for next days market movement is always written and posted on previous day’s evening