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Posts Tagged ‘Indian indices

Dare to be Bear

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The stock market is at a highly vulnerable point, both fundamentally and technically.  Fundamentally, the current rate of economic growth is unsustainable and the valuations have now faced significant challenged.  Technically, the market is overbought and is losing momentum.

Fear of Inflation was the beginning rationale for the markets to lose some strong gains, this was followed by worry on corporate earnings and now its spreading to a challenge to the growth of Indian economy, and that whether or not it can sustain such high levels of growth amidst such high inflationary expectations is one thing which the markets are waiting to see with bated breath.

Suddenly, we are now trying to justify the magnitude of fall on our markets with some sort of correlation with the global markets or other markets ,such as commodities etc. Unfortunately, Indian indices have managed to beat the so called hypothetical estimates of a support and is drifting lower and lower as I write. I think, the problem so far is a local problem as the price is justifying, however, there are chances that it can spread or atleast have some effect on other markets, but that will take some serious time and effort.

If you follow reason far enough it always leads to conclusions that are contrary to reason – Samuel Butler.

So is this the market environment where I want to make that big bullish bet? From where I stand, the answer is no. The reward to risk is highly skewed in my opinion to the risk side of the equation, and this isn’t because of sentiment alone. The market may go higher, and if it does, so be it. I will participate if the reward to risk profile, as I have defined these metrics, improves. Trading and investing is about managing risks. If you don’t want to assume that responsibility of managing risks, then you should be a buy and hold kind of investor.

The best strategy (if there is one, at this point of time) is to wait with patience and watch the markets. Protecting your portfolio is ideally recommended, and we could also look at reducing the size of the same. Hope is one sentiment which fails to impress me time and again in markets strictly, because of the deep pains it can give, and test the patience of every investor/trader.

One thing is for sure that the markets are not insensitive, they just don’t care.



Written by Kunal Bothra

February 8, 2011 at 5:10 pm

Extreme Volatility..

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Hello everyone,

Indian indices witnessed an extreme volatile session today, with the range for Nifty/Sensex being close to 2% each. Such volatile trading sessions have been a rarity since the last few trading sessions. Nifty managed to close above 1% from the intraday lows, Nifty / Sensex closed at 5999/19930, jus below the psychological mark of 6000/20000.

In the opening session markets took cues from global markets, specially Nikkei and Hang Seng showing solid strength. But due to weakness in banking stocks, the markets cracked very sharply to hit 5925 levels on Nifty.

The auto sector however showd solid strength, with Hero Honda, tata motors, Maruti, TVS showing solid strength.

Technically Nifty looks to be in a channel, with the nearest support for the Nifty placed at 5850-5880 levels. Nifty candestick pattern shows good lower shadow, which indicates that there has been strong buying from the lower levels. Volumes overall were a slight concern. Nifty has managed to take strong support at 55DMA(fibonnaci level).

Banknifty still remained under pressure, which will be a cause of worry for the markets. Realty maintained its streak of losses and underperformance wrt to benchmark indices. The o is 1:2 which is still negative for the market also suggesting that today’s rise was probably not a healthy rise in terms of participation amongst all stocks.

I think in these times of trading range, it is always preferable to play stock specific, and keep stop losses strict.

Written by Kunal Bothra

November 18, 2010 at 11:55 am