Mar 282011

The 2.3% bump UP for the Nifty on Friday was quite smooth and brought a lot of cheer on the streets but the CRITICAL 5690 level still remains unconquered. Given the smart rise of the previous week, it may not seem formidable after all. Nevertheless, we will have to wait and see what the market does. So, let us do a what if scenario.

a) What if 5690 is taken out - the bullish case. The market structure that we thought was unravelling in this post would not be the case and markets would continue to head higher. The problem here is, the market has spent more days between 5600 and 5200 than it took to decline from 6182 to 5177. So it is looking more like a short-term bullish picture. And the question - How much higher? It could be around the region of 5900 but may not be much higher.

b) What if 5690 is not taken out - the bearish case. Obviously the old targets would still be alive while we may still have to see if we need to slightly review the market structure. But the markets need a quick decline - the longer Nifty holds above 5600, the odds of the bears losing advantage would increase.

A couple of  things that needs to pointed out here. Firstly the volume of the short-term breakout did expand slightly, it was nothing exceptional as the media is projecting it to be (see the horizontal blue line on charts).

Nifty - Daily Charts

Secondly, while the small caps and mid-caps tend to follow the large caps, they are yet to clock higher highs - risk taking is not yet back, at-least so far.

  4 Responses to “What next for the Nifty?”

  1. Interesting views Jai. Just have 3 points to make from my side.

    1) The High beta sectors across all the time frames are stabilizing. Banks and Realty and even Infrastructure today for some extent are showing tremendous resilience and strength. I would emphasize the strength aspect with Banks and Autos and would keep Realty and Infra out at this moment.

    2) IT has begun supporting the market again. The previous decline which happened in Oct/Nov saw I.T. outperform the broader markets. Now, usually when I.T. outperforms, then markets do become defensive in nature; like it did in Oct/Nov 2010. During the same period Banks and Autos fell. In today’s scenario, along with I.T., we can see Banks and Autos perform well. This in my opinion is a sign of strength. Banks and Technology have a very good weightage in the Index and if they appear stable, the likelihood of markets moving higher increase.

    3) Midcaps and Small caps always run faster in robust market conditions. It works the other way round usually. When Midcaps/Small caps run faster than Index, its time to be cautious. After correction however, Mid caps and small caps are very slow to react. This is when focus is on Large caps. When the sentiment improves and markets begin to move higher, risk appetite of markets increase (as mentioned correctly by you). This is when Small caps and Mid caps begin to head higher (and the time to become cautious returns). Just a vicious cycle I suppose 🙂

    Just my 2 cents on the same. As always enjoyed reading your views.

    Raunak Agarwal


  2. Astute Analysis Jai…thanks for sharing…:)

    I have also found that your wave analysis is extremely good. It would be interesting to know your views on the wave we are in and what we can expect going forward, according to the same. 🙂


  3. Hello Jai Bala,

    I can not agree more with you. But from 28th February onwards I observed market changed its behavior and it was exact opposite to the fall from 6180 to 5200. I was long and booked my profit at 5700. Now I want to see how the market is going to behave. Yes, I do have unique way of understanding the market but the paradigm in my mind is exactly as you mentioned in the blog post. In any case I told my self – lets dance with the wolves.

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