Month of August has been a surprise for all positional traders. After a low of around 5100 we saw a quick recovery to 5700 the same month and ultimately to 6100 after New RBI governor took up the charge. IIP data had improved last month from almost -0.20% to +2.6 % MoM , which is a trigger sign to new road of growth building up. Yet inflation was not down as expected due to disastrous currency movement. But since then rupee has cooled off and we can be biased towards lower inflation in coming month data. One of the best fundamental move last month for economy was the liberalizing of new bank branch norms for pvt banks. New RBI governor seems promising and as per various economic analysts, monetary policy steps taken by him were the best for economy as per current situation. October month is going to be earning season and we could experience some real volatile sessions on Nifty.
Central government is working hard to improve economy by controlling CAD. Gold imports have decreased duty to hike in import rates but on other hand we need some strict plans to reduce CAD than with just hiking duty on Gold import. FDI limits in various sectors have been raised but investment are not getting clearance with the respective departments. Jet-Etihad deal has been talks since almost a year but still has been facing many hurdles. Second, WalMart clearance for retail sector is still lingering. On other hand Posco steel discontinued its willingness to invest in Orissa. Now 100% FDI in Telecom Sector. So , I am of view that we need more Dollar investments rather than restricting to imports. Looking at Pharma Sector, Indian firms are losing on quality check. Wockhardt and Ranbaxy are facing ban from USFDA which is a hit to the sector. Overall, fundamentally we need some check on our clearances to attract flow of Dollars in our country to reduce CAD.
Now let’s get to Nifty technically. Here I have attached a monthly chart of the Nifty Index. All the technical analyst might have understood from the chart that we are in secular bull trend. In the Month of August we ended up with Wave 4 of a smaller degree and now we are in the formation of wave 5 to complete wave1 of larger degree around 6200-6500. Nifty has been taking strong support at 50 Monthly EMA which is currently at 5270 which is a strong support for worst downside which I don’t expect now. Looking at CNX Midcap and CNX BankNifty Index charts they are suggesting stronger buy next month than Nifty Index. In the month of October we may see some downside from Current level of 5833 upto 5741, 5677 or worst scenario upto 5536. Though I expect markets wouldn’t go down below 5741. I would suggest for going long on MidCap stocks for your portfolio with holding view of more than 1-2 years. My top picks from mid cap and small packs which could be multi baggers are DENABANK, ORCHIDCHEM, TATACOMM and RPOWER.
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Our Strategy: Going Long on the index and adding on dips at 5677/5536 with a tgts of 6212/6370/6500 in next two months. SL could be at 5471
Note: All the data and graph is as of 28 September 2013 closing
Disclaimer: I may have personal position in index and above mentioned stocks. Views and News mentioned above may have Errors and omissions. My views are biased more towards technical analysis. Please read and study the market carefully before investing on my idea. For any suggestion contact me on my email. Some words mentioned in article don’t mean their actual meaning. They are correlated for market.