INDIAN STOCK MARKET ANALYSIS FOR 15TH OCTOBER 2007 AND TILL THE YEAR 2017: For the 2nd time nifty has closed down approx 100 points , it seems
like now it cant stand tall and is about to fall like a dead cat. But, the
concern is that its still not making a weekly down close which shows
its latent strength, one need to keep close watch at this weeks trend
level ( 5326) below which its surely going to make a wekly down close 4
this week , but so long it maintains above 5326 one cant say much.
Taking clue from foreign markets nikkei , shanghai and hangseng closed in
the red on friday and so was our market, so on monday nikkei , shanghai
and hangseng (specially hangseng) need to be down if our market have to
fall. Watch out, tech sector may rebound a bit on the upside after
nasdaq rose 1.2% on friday. The nifty index put call ratio is at 1.36 and
the market put call ratio is approx 1.09, which is really exceptional
at such a high market index, it simply favours the bull but i hav my
doubts coz the options market is not developed fully, so one should not
take much clue from here. One more story favouring the bulls is the
liquidity factor not only from the fiis but from the diis as well, its said
that the domestic insurance cos are also looking for putting money in
the market , the money they have raised through ULIPS with a high
equity componet. Also mutual funds are sitting on 14000cr cash , looking for
good opportunity, so the fall in the market would be very short lived
in such a scenario, one should look for booking profit very fast on the
short side.
In the broader picture upside next target as
per fibonacchi is 5908 after having crossed 5199. On the downside,
support is at 5394, then 5184 and then at 5033.(1/3rd correction of the
rally from 4002.2 to 5549.3). Trend of nifty index is still up based on
the simple theory of higher highs and higher lows , the trend will be
maintained if nifty manages to cross its immediate high of 5549.3, for it
to get into downtrend it can do two things, one is it straightaway
breaks the last intermediate low of 5000.95, which looks a bit difficult ,
the 2nd option is, it rise a little from current levels but fail to
break 5549.3 on the upside , then breaks the low of friday i.e 5402.6.One
must also keep in mind the 200 DEMA of nifty is at 4267 levels which is
much down from current levels but prices tend to touch its 200 dema
sooner or later ( plz note that 200dema is not a constant it keeps
changing, and if the market does not falls, 200 DEMA will come near market
levels in 200 days ).
Fundamentally Nifty’s (5428) valuations based
on last q annualised earnings is at approx pe of 23.5 and m.cap/ sales
of 3.06, which shows the valuations are stretched beyond limits. But
if we consider the 1 year forward pe( its 20.43 asuming the growth of
15% annualy) and forward m.c/sales( its 2.66 ,assuming the growth of
15% annualy) ,the picture is not that scary, and if we r really a long
term player, say wanna invest for next 10 years i.e till 2017 the
market is dirt cheap, look how ,the 2017 forward pe is just 9 assuming just
10% growth in earnings and mcap/sales just 1.18 assuming 10% growth in
sales. A healthy cylical market moves in the band of 10 to 20 pe and
m.cap/sales of 1 to 1.5 , So based on the 2017 expected earnings and
taking the higher side of the band as targets, the 2017 target of nifty is
12062 as per pe ratio and atleast 6900 as per m.cap/sales ratio ,
current investment at 5428 will become 12062 in 2017 , a return of 122% in
10 years and annual return of 12.22% , But the picture is not that rosy
as per m.cap/ sales ratio its just 27% return in 10 years and anual
return of 2.7%. But, PE ratio has more significance coz its the earnings
which matters at the end of day. Now, one need to focus on the next
best alternative investment opportunity, its as far as i know is 9% p.a
fixed deposit in selected banks.So at current levels market is giving
3.22% p.a more return than FDs. And, also note that the market is also a
good hedge against inflation too, this good side is absent in FDs. Also
take note that the above analysis is done taking conservative estimates
of 10% growth in earnings and sales , so there is lot more than
projected coz our market is growing at 20-25 % from last few years.
Having known the good things one must also remember
that there are some risk attached with the gains that one may hav got
excited about, the risk is the future which is unknown, its just the
past which is used in forcasting but the future is a mystery which may
exceed our expectations or may simply prove us as aggresive fools. Well,
one must not loose heart with the fear of risk , instead one must
manage risk efficently to be on the safe side than on the sorry side. Market
fundamentals does not change overnight, it gives enough signs of its
change before it changes completely, so one must keep close track of the
economic indicators , the most important among them is the automobile
sales nos, which are given every month by the concerned authority ( i
think SIAM), the other indicators are GDP growth figures, IIP nos.,
inflation figures, earnings and sales growth nos. of cos. etc. An
investor need not look at the market intraday. End of the day figures are more
than enough for his peace of mind.
Talking about Risk Management, the thumbs rule is to take the
lower of the two: (1) Risk capacity and (2) Risk tolerence. For
example a person may have 100 cr but he starts crying if he looses more than
100000 bucks, so although his risk capacity is 100 cr but his risk
tolerance is rs 1 lakh , so he should not risk more than 100000 bucks.
Now on the other hand a roadside gambler have just 1000 bucks in his
pocket but is ready to take risk of 1 cr , so in this case his risk
capacity is 1000 bucks and risk tolerance is 1 cr , he should not risk more
than 999 bucks or else he will bring trouble to himself and to his stock
broker.
There is one group of investor who invest for 5 min , i am
talking about day traders 
, these people provide volume in the
market, its a different thing whether they make money or not , but they are
an essential part of the market and without them the volume would drop
like anything in the market, one would find it difficult to even
invest coz the difference between the bid and offer would be too wide.To end
my analysis i would like to quote a funny statement :
“October. This is one of the peculiarly
dangerous months to speculate in stocks. The others are July, January,
September, April, November, May, March, June, December, August and February.”
——Mark Twain.
But, as per me, day trading is an art of
making smart money ,it demands passion, preparation, absence of ego and an
attitude of learning, so that one need not loose one’s peace of mind
and therefore one’s sound sleep.
S&P CNX Nifty 5428.25
Lost its strength on Friday, looks weak and therefore there is good
chance of a good fall from Friday’s closing levels, as per formula broken
s of 5438 now downside t is 5271 down 156 points or 2.88%.Before that S
of weekly trend comes at 5326 down 100 points, so watch out.
upside r at 5482-5510 can short there for sure with sl above these
levels , coz above these t is 5673.Today’s trend is 5460 up 32 points and
r1 at 5517 , 89 points up., s1 at 5370 , down 57 points. Can short on
opening also or near today’s trend level with sl above it.
FUTIDXNIFTY25-OCT-2007 5440.9
Lost its strength on Friday, looks weak and therefore there is good
chance of a good fall from Friday’s closing levels, as per formula broken
s of 5449 now downside t is 5282 down 159 points or 2.92%.Before that S
of weekly trend comes at 5340 down 101 points, so watch out.
upside r at 5496-5525 can short there for sure with sl above these
levels , coz above these t is 5688.Today’s trend is 5472 up 32 points and
r1 at 5528 , 87 points up., s1 at 5385 , down 56 points. Can short on
opening also or near today’s trend level with sl above it.
RELIANCE INDUSTRIES LTD 2565.75
Lost all its strength on Friday after no great surprise from its agm,
broken lots of formula s now next t is 2524 then 2460 ,also broken good
s at 2582 , its 10 % retracement level as per fibonacchi levels , now
next level is much down at 2447 , upside next r at 2579-2592 sure
short near it with sl above it coz above it t is 2668 , weekly trend at
2496 also s2 for today , its down 69 points , good support, but if broken
more downside 4 sure .
today’s trend at 2610 up 45 points, but it may not go above 2579-2593
so can short near these levels, or short on opening with sl above 2579,
for t of 2541-2524.
STATE BANK OF INDIA 1862.75
As usual defied good inflation nos. and fell like anything,The market
is also expecting a CRR hike by the RBI on oct 31st to suck up liquidity
from the systems, sbi looks more weak as oi and volume is supporting
the fall ,next t is 1814 then 1769. Also note that unlike nifty and ril
, its very near weekly trend , below it its surely gonna become more
weak 4 the whole week.upside r at 1877-1887 can short near these with sl
above these coz above these t is 1942 , today’s trend is also at
1887, r1 at 1925, s1 at 1825. Fibonacchi s at 1833 then 1779 then
1751.(38.2% retracement)
INFOSYS TECHNOLOGIES LTD 1929.7
After a good fall, it seems o.I and volume is not supporting further
fall in it , so it may rebound a little on the upside , technically
next down target is at 1886 then 1838. But can look 4 buying a little qty
there with sl below the mentioned levels.Weekly trend can be the target
, its 1991.
upside r at 1931-1942 above these t is 1999 , today’s trend at 1936
, r1 at 1968 , s1 at 1897
TATA STEEL LIMITED 850.35
No more looks weak as oi not supporting much fall, next s at 824 then
804 . Can even look 4 buying near these levels.Weekly trend at 836.5
upside r at 847-852 very near above it 877 , todays trend at 858 , r1
at 882 s1 at 827
TATA MOTORS LIMITED 803.35
like tisco doesn’t look much weak as per o.I movement , however level
wise next s at 780 then 760 look 4 buying near these.
upside r at 800-805 very near , above these t is 829 , today’s trend
at 810 ,r1 at 831 , s1 at 782 , weekly trend at 796.
