Archives : DAILY MARKET OUTLOOK : 24/03/2008
DAILY MARKET OUTLOOK : 24/03/2008.
Market may move higher but sustainability at higher levels will be an issue. Nifty will have to close above 4595, for any upmove to sustain.
SENSEX Resistance at 15170-15298-15369. Support at 14815-14719-14677.
NIFTY Resistance at 4595-4620-4676-4718. Support at 4533-4468-4448.
  • BHARTI 777 SL 764 TGT 804-822.
  • CAIRN INDIA 223 SL 214 TGT 232-238.
  • PNB 461 SL 443 TGT 483-490.
  • INDIAN HOTEL 109 SL 105 TGT 114-123.
  • NALCO 447 SL 436 TGT 458-466.
  • TECH MAHINDRA 657 SL 631 TGT 675-689.
  • JPASSOCIATES 204 SL 199 TGT 210-215.
  • FEDERAL BANK 209 SL 199 TGT 217-223-242.
  • DIVIS LAB 1186 SL 1132 TGT 1250-1300.
  • NIIT LTD 99 SL 97 TGT 105-110.

 IS THIS THE END OF AGONY?  22/03/2008.
Indian market has been experiencing bear phase since the last 10 weeks. The bear phase is very painful and leaves behind lot of scars on the portfolio of investors. This time their portfolio has been reduced to less than 50% of the invested amount. So every investor and trader has been asking the same question, as to when this painful correction will end.
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IS THIS THE END OF AGONY?  22/03/2008.

Indian market has been experiencing bear phase since the last 10 weeks. The bear phase is very painful and leaves behind lot of scars on the portfolio of investors. This time their portfolio has been reduced to less than 50% of the invested amount. So every investor and trader has been asking the same question, as to when this painful correction will end.

Q. Has the correction ended?

The answer cannot be a simple yes or no. When the market fell steeply from a dizzy height, we called this a sharp correction. The market got hurt because of the steep fall and is now resting before trying to move up. It will be difficult to differentiate between the last phase of correction and the start of a recovery. The recovery will be a slow and painful process. The market will first come out of ICU, into a normal hospital room and then in the next stage will be discharged from the hospital. So the process is bound to take sometime. Infact it will be healthy for the market, if it rests for sometime before running again.

Q. What should the investors and traders do?

Investors, for the first time in the last four years, are able to find value in the Indian stock market. Investors should keep in mind that the Indian growth story is still intact. So, when the market itself has corrected 30% from the top, it is an opportunity for the investors to buy for the long term and reap the benefits. Returns from this level will be atleast 50% over a 12 to 18 months perpective. So investors should start investing, as such opportunities are rare and should not be wasted.

As far as traders are concerned, they should stay away as the market is very choppy and volatile. The chances of making money appear slim and the chances of the stop loss getting triggered are very high. Traders better stay away.

Q. What will lead to reversal in the trend?

The main trigger will be the Q4 results. The result season will kick off in the first week of April and that will provide a direction to the market. The advance tax figures of the Indian companies are very robust and that is a good indicator that the earnings might not be so bad.

The liquidity flow in the US market due to the recent rate cuts, will find its way in the Indian market. That will be the trigger that might change the sentiment of the trading fraternity. As a result the Indian Mutual funds, who are sitting on a huge pile of cash, will have put the money in the market.

Q. Will short selling be bad for our market?

Short selling, which will be allowed come April 21st 2008, will certainly not be bad for our market. The reasons are discussed below:

1.       Our market has always been a long only market. That means that one has to have a bullish view in the market or a stock, so that he can buy at a lower price and sell when it reaches a higher level. But there was no way, one could express that a stock was overpriced. But now, that will change and one will be able to short the stock at unsustainable prices. So it won’t be ONE WAY traffic anymore.

2.       Introduction of short selling will lead to a better price discovery mechanism. The market price will be determined by the demand and supply forces, without any undue advantage to either side.

3.       It will be difficult for the operators to jack up the prices easily, as others in the know can short the script. Henceforth, stock price manipulation will be difficult.

4.       Short selling need not mean that the prices will decline easily. Infact, short sellers will cover their short positions when the market falls and they act as a cushion to the falling prices.

5.       Short covering rally are a treat to watch in the stock market. Short covering can often lead to panic buying and that rally is generally one sided.  This leads to a bear squeeze. There is no need to sympathize if the bears are squeezed.

 

Q. What is the conclusion?

Simple, start investing, as the investors never had it so good. There is utter pessimism in the market and that precisely is the reason that the bear phase will end sooner rather than later. Always remember that majority of the people lose money in the stock market and in the same logic, majority are normally never right. So when every one is talking of Sensex in four digits, it is time for you to take the fishing rod out and do some bottom fishing.

 

BY THE WAY HAPPY HOLI TO ALL. ESPECIALLY MY STUDENTS. - JATIN SANGHAVI.

Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

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