Market outlook for medium term: Be and Make (18-06-2009)

It is becoming very difficult to answer individually hence from here onwards I prefer to give the calls on in-depth analysis. I think this analysis will clarify all the doubts and will very useful for the investors.

Market outlook: As I was expected market is correcting. Now the question is whether it will end? Whether it will take restart its bull run from 4220 levels? Or we are going to dip to the levels 3600?

Can any body give some picture on this? I think it is very difficult to predict it!
That’s the answer you will get even from the big analysts!

In my view, FIIs hugely shorted on market in the FnO and there are nearly shorted 6000crores only in the index futures and out of this 4550cr were shorted around the 4100-4300 levels. So, it gives some cues to judge the pivot levels in the near term.

So, for sure market will go below the 4200 levels as they will have good profits hence markets for sure will go below the 4200 levels. One should remember that it is a emerging bull market and markets never fall in a straight line means in the mean time some positive bounces for sure happen. Traders should use this bounces to short for intraday trading and for short term investors should use this to exit to keep with the (at least 40%). This advice is only for those who are sitting with more than 80% exposure in equities.

Then where the supports lie, according to the Fibonacci levels 3950-4000 will be the crucial support level where 61.8% from the current is lying.

There is a lot of cash sitting on the sidelines even now (retail, some FIIs and DIIs) to pump in the Indian markets. In the last bull markets china traded with almost 30% premium to the other emerging markets and after the election results our market at least trade with 20% premium when compared to the BRIC markets.

Valuations are now stretched for sure after this correction one should be stock specific. In my February 09 report I clearly gave 10-12 stocks which attained 100-300% in this rally. Now, it’s the time to re-construct the portfolio.

So, one should again start buying between the 4125-3950 levels in SIP manner.
One should deploy their cash in three parts and investment should start around the 4125 and on every 60 point fall should invest whole targeted amount.

All in all, it’s a emerging bull market. In 2008, there is 85% negative news and 15% positive news. Now the condition is at 55% bad news and 45% good news and at the end of this year this should be around 30% bad and 70% good news across the world. So, at this point of time some pessimistic news will come for sure. Hence, during this time huge accumulation will happen and the up side is capped from the current levels. When I viewed the FY12 onwards then the markets will blast for sure. So, one should have three year time frame from here to fetch great returns.

With thanks
Be and make