Wednesday, December 19, 2012

An Update on Nifty View & Stock market Rally

Update on Nifty : We have been articulating the strategy of buy on dips since August last week,when Nifty was trading at 5225,our view was that Nifty will see huge rally as liquidity(hot money) will perk up high beta markets like India.The rally will be largely based on Liquidity & not due to improving fundamentals.Macro economic environment is as hazy as during start of year.Around 5551-5744 Nifty levels,there was consolidation for 4-5 weeks.In between Govt woke up from deep slumber and did some cosmetic Reforms to revive 'Animal Spirit' in Economy (which we really do not think will have any major impact to revive Economy & RBI gov also has same view & hence reluctant to cut the rates).Infrastructure,Investment & Innovation are three I's to Revive the Economy.Sadly,Govt is not addressing any of those & instead working overtime with short term view of getting mandate of People for 3rd term by increasing social spending.This move is very myopic and will hurt economy in long run.The twin deficits CAD & Fiscal are growing at an alarming rate.The new company bill,land acquisition bill & new banking norms are good reforms,but where is thrust for economy? Where are the new investments in form of FDI? Creation of NIB was a good move on part of FM but that the original National Investment Board proposal of FM has been massively watered down is without doubt the handiwork of election lobby in govt that has myopic view on elections & Feb budget will be a populist budget with bigger allocations in social spending to target lower income votes. On ground level we are not seeing any new investments.All we hear is about FIIs pouring in hot money in stock market.This sounds good as long as Risk on Trade plays out,moment Risk off trade comes on the foreground, Market will correct heavily because it lacks fundamentals and necessary ground work for such massive rally.Now talking about Nifty levels,5944 is one level,every trader should watch out,Expect 3rd leg of this upmove as and when Nifty gives Daily + weekly closing above 5944.Key support levels are 5815/5744.Breach of 5744 level will terminate the bullish trend. For daily nifty trading levels with Ace Trading Table & market outlook check out

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