Nifty

In my previous post on Nifty written on 30^th April 2015, I wrote, “Indian markets have mostly moved sideways in last four months and formed a head and shoulder reversal pattern. If we look at the daily chart of nifty we can see that Nifty is currently trading at a very crucial support of 8100 - 8150 levels. Once Nifty breaks below 8100 level the next support for nifty is in the range of 7700”

Nifty made a low of 8000 and bounced back to 8500. The charts patterns have become much more apparent since then. If we look at the first chart we can see the head and shoulder forming clearly on the index. Any breakdown below the neckline of 8000 will push nifty towards 7000 - 7200 levels. 

In the second chart we can see the downward sloping channel. Unless and until Nifty breaks above 8500 short term upside should be ruled out.

The last chart is the quarterly chart of Sensex. We can clearly see index trading between two channels. As we hit the upper end of the channel we are seeing a correction. Since March 2013 this is the first quarter after 9 consecutive quarters of up move that we are having a negative quarterly candle.

I don’t expect markets to move up significantly any time soon. At best markets will be range bound between 7000 - 9000 levels for 12 – 24 months, before they finally break above the channel resistance and we will see index doubling or tripling in next 5 years after that.

Summary:-

1.       Sell market below 8000 on weekly closing basis

2.       Buy market above 8500 on weekly closing basis.

3.       Market should be range bound for 12 – 24 months

4.       Market range should be 7000 – 9000

5.       We should see a bottom formation at 7000 levels in next 12  - 18 months.

Market Musings:-

I think they way things are playing out this could be the best outcome for NaMo govt.  The market started rallying in 2013 at best a market rally can be sustained for 4 – 5 years. If the markets will rally continuously we will see exhaustion around 2017 – 2018 and a crash in 2019 which will be the worst thing for reelection of present govt.

So the best thing would be a market breather where by market consolidates and do time correction for next two years and start a rally in 2017 which peaks out in 2019 -2020. When people will see market doubling in two three years this will pull the economy with it and the chances of reelection of the present govt will be magnified.

I think the economic policy adopted by NaMo also focus on building long term competitiveness instead of cheap market rally fueled by easy money. The economy will take time to rebound but this time the rebound will last longer and India will emerge much stronger.