The bearish signals that came through on Wednesday were rendered void yesterday by the strong up-move yesterday. This is exactly why we never pre-empt the market. It has always paid well to wait for the breach for the previous days low (or the previous days high in a bullish case). If you did notice, Wipro was relatively weak in yesterday’s strong price action for the IT stocks.
The focus now shifts to the critical 5170 on the Nifty. As long the market stays below that level, the next leg being a sharp to the downside remains. Watch out for the USDINR cross rates. The level of 48.3 is an important and a reversal around that could mark an important turning point.
Whenever I have doubts whether we are in a bull market or bear market, I always revert to my prop indicator of the indian economy. It still says we have not reversed and quite a distance from it. (See Nov post on the reliability of this indicator)
We still see short-term positives in HUL, Bharti and Syndicate – if market provides the right environment we will try position ourselves long here for some quick gains.