Sep 122011

Some of you have requested my short term view on Nifty and here goes.

Nifty Daily Charts

The upward correction that started from 4720 saw some serious selling pressure on Friday. It is possible that this correction may have ended as per the red scenario and a new low may be coming. Alternately, the upward correction may have a little more juice before another new low for the year comes through(orange scenario). So if anyone decides to go short, they need to do be ready with money management strategy around the 4900 zone of Nifty.

While we are here let us also look at the INR charts.

INR daily charts

The pace and steepness of the USD's appreciation against the rupee has all the signs of an impulsive move. You might want to go back and refer to our Aug 26th post on the INR for the bigger picture.

As some of you would have noticed from the comments section, I consider the breakout in the dollar index a significant contributor to the global bear case.

Dollar Index - Daily Charts

After building a base for 3 months, the dollar index has broken out of a range. This is likely to accentuate the risk aversion across various asset classes.

Given the strength in the dollar index and weakness in rupee - I will not be surprised if a new low comes through in the month of September for equity markets.

PS: Ill be on Bloomberg-UTV today at 8:30 IST.

  37 Responses to “Nifty, INR and Dollar Index”

  1. Dear Sir
    Thanks for your valuable warning, it looks eminent that equities will suffer heavily as the $INDEX HAS
    BROKEN PAST 77, because the relation between $index and equity is inverse

    Dr. Vasant Bele

  2. Hi Jai,

    Was great to see the analysis using EW theory. Your views on our previous discussion were of great help.
    If convenient at ur end please elaborate on the following…in small wave 1 (orange one)…why isn’t the same ending at 5195 (where its an orange “b” labelling) …Is it necessary that we have an a-b-c correction (spottable) in all corrective waves??


    • Rishabh,

      I’m seeing orange 2 as an expanded flat – I could count 5 from 5195 on the smaller time frame – so it had to be a C (See July 11 post). And expanded flats tends to occur when markets are in a hurry to move in the impulsive direction. As I said earlier, you can choose to see 5195 as wave 1 low, the count may be valid, but this seemed more easy to count for me.

      All the best,

  3. Thank you Jai, Simple and excellent analysis.

  4. Thanks Jai,

    Guess I need to go for some kind of software now…Have been using Icharts EOD charts till now . Free of cost 🙂

    Thanks again

  5. Hi Jai,

    At the outset, I wish to thankyou for the consolidated post for Nifty, INR and dollar. Highly obliged……to a layman like me, it really put the things in perspective…….

    Great analysis and thanks once again……

  6. Hi Jai,

    In the case of dollar appreciating, do you expect IT stocks with more global exposure to spring a surprise on the upside or do you think it can only fill the gap that the spending cut is gonna create?


    • Hi Rang,

      Would you believe if I said a higher crude is good for stock markets? That has been the case since 2003. One of the shortcomings of fundamental approach is that they rarely recognise the evolving dynamics in the marketplace at the right time. A stronger dollar is not good for IT stocks, it was good until Jan 2008. Just place DXY chart on top and CNX IT index charts at the bottom – you will be pleasantly surprised.

      Best regards,

  7. Hi jai,
    any view on spiceje,banking stks?

  8. Gold price movement – comment please…

  9. hello
    sir both gold and silver gone sideways difficult to said earlier also i find sideways movements very difficult for trading

  10. sir looking forward for your seminars on trading this difficult sideways markets

  11. Hi Jai,

    A humble request from my side. May be first and last of its kind. If convenient, could you please explain HDFC bank and SBI (or any one of ’em) on charts using EW. Would be of great help.


  12. Jai :-

    Just want to confirm your view in short :-

    1) Dollar index is inversely related to indian markets, and hence as it goes up , indian markets chances to go down increases.

    2) Dollar Index is directly related to IT stocks/index, so as it goes up, IT could consolidate/move up.

    3) INR if moves towards Rs.50/- and above, it will hurt India due to Inflation via Higher money required to pay for oil due to costly dollars, and also due to crude and brent not correcting (Showing chances to go higher??)

    4) forget everything and just look at the composite of the market, Tata Motors, Infy, TCS, ICICI bk, sbi, ril, etc index heavy are coming lower and still can fall a lot , purely looking at the charts.

    Am I correct with the above points??? we should not be surprised to see 3700 in next 12 months ???(if crude starts to rise.)

    • Hi Vikas,

      All correlations exist for a while and then they become loosely correlated or disappear. So one needs to be flexible and alert.
      In March 2009 DXY peaked at 90 and dropped to 74 in Nov 2009 during this period CNX IT rallied from 2000 to 5000 and was inversely correlated. From Nov 2009 to Jun 2010 DXY rallied from 74 to 90 again, the CNX IT Index rallied to 6200, dropped back to 5400 and remained choppy. Once again when DXY dropped from 90 to 75, the IT index rallied and When IT index hit a high in Jan 2011, the dollar was still weakening although off the lows. It looks more like a weak dollar helping the IT stocks.

      Between 2003 and 2008 crude went from $17 to $100+, Indian stocks went from 920 to 6300. In 2009 crude and stocks bottomed and rallied together until Nov 2010. I agree with you on point (4). 3700 could come but it will most probably be with a falling crude.

      Hope that helped.
      All the best,

  13. hello sir
    which time frame you suggest for swing trading i mean one hour fourhour or something else thanks in advance

    • Zubair,

      It depends on the asset class. I do not find anything lower than 2hr time frame useful in swing trading forex. Indian stocks – hourly or even half hourly I find quite interesting set up with much less whipsaw. Ofcourse, your preference may be different than mine.

      All the best,

  14. hello
    sir thank to choose the time frame depending on the asset class.i was using one hour for forex.thank you for your guidance of using 2 hour time frame

  15. Hi Jai,

    Do u see any juice in the technology stocks rally ? Like Infy ? I understand ur comment about not relating rupee to IT stocks, but is there a bit of money to be made in the short term.

    Also, u had mentioned that u had expected better from SBI. Do u think the charts are showing a possible pop up in SBI ?

    Thanks again.


    • Hi Rut,

      Yes, it does seem there might be little more juice for IT majors but its just for the short-term. Tradeable but SL essential. But SBI should not have gone below 1940, so the structure is more bearish than I thought.

      Good trading,

  16. Hi jai,
    have been waiting for 4850 to go trading long which as of now has not u see it coming this week or nxt and wld it be a gd level to go trading long? asking this question only bcause of a strong feeling that intermediate bottom might b in place complete agreement with ur view on long term investors should remain in hibernation.. i know ur latest article answers lot of my above questions but still since ur alternative view says a possibility of some juice might b left on upside and my inclination to go long on appropriate lvls 4 a trading bounce, i am putting up this question..also wld 930 b a gd level to go short on jubilant food with a tgt of around 800..seems promoters themselves r not very comfortable with cmp and hv been selling in small qtities..Thks..

  17. err……where did these faces (right of the question box) come from ?

    Also, Jai…just because u r the boss here, I guess you get the choice of the Smiley faced eh…. ?

  18. hello
    sir the image which it auto generated looks like crying issues

  19. Jai Bala,

    My mother not at all happy with my emoticon
    – Kishan

  20. hi jai

    would like to know the outcome of the poll which you are running ,would also like to know you views on sesa goa and jsw steel

    • Hi Vijay,

      More than half of the folks want a product on the Indian markets and a very high number of you have expressed interest in TA seminar. I’m evaluating the admin and delivery side of things.


  21. Hi Jai,

    Happy to hear that you are working on coming up with a product for us. Humbly requesting you to come up with one for trading indian equities and derivatives ASAP before we get caught in this volatiliy and lose a big percentage 🙂


  22. Dear Jai,

    I am following your post since last 6 months and baffled by your accurate analysis. I am also interested in your product on nifty. What do you think is the short term target for nifty in this downtrend.

    Warm regards,

    • Hi Ajay,
      Thank you. Short-term can be subjective. Let us follow the trend which is down. I will have to assume that 4720 will go sooner than later and trend towards 4300-4200.

  23. I heard ur interview on cnbc and ur target for cnx it is 4800……Can i slam IT index October Futures around 5580 (positional) and what should be my stoploss ? whats ur timeframe for 4800 lvl on IT index…


  24. Hi jai

    nifty formed a double bottom of sorts at 4750 and bounced back sharply … tomoro it may open gapup at 5040.. the speed with which it came back from 4750 is amazing….. chances of nifty crossing 5200 area
    this time seems bright………….. what do u say..???

  25. Dear Jai,
    Pl come with a post on Nifty. We need your views at this crucial junture.
    It will help us who are short on the nifty.

  26. hi ajay,
    i am also regular reader of this blog……. just i am giving my view here……… till 4700- 4750 to 5150 breaks in either direction ………………… nothing can be pre empted……. yes as per the weekly charts chances of a breakdown are good………

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