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Where the Nifty is going?

November 24, 2015
Time: 10.15 pm

Where the Nifty is going?

We go week by week analysis of the market movement in order to set up 'short strangle' strategy to make money.

Now we will take some look at Nifty.

Where the Nifty is going, may be in the next two to three months.

That means we are going analyse the medium term trend of the Nifty.

First, Fundamentals ( I give little importance to technicals).

Whenever Parliament session is on, usually markets will be under pressure.
That is because opposition always disrupt the Parliament proceedings.
We do not know what is going to happen this time.

A group of influential FIIs have met Rahul Gandhi, even Finance Minister Arun Jaitley has met with Rahul Gandhi on the pretext of inviting him to his daughter's marriage.

Today congress leader of opposition in Lok Sabha Mallikarjun Kharge said "Spirit of Give and Take can ensure passage of key bills like GST"

Today Arun Jaitley said "Govt. is ready to discuss changes in GST bill with Congress"

So there is a sense of optimism around with regards to GST bill.

If GST bill is passed, Nifty may move about 300 points higher within few days.

But it is not going to be that easy. So markets may go down due to anxiety before going up.

As for as my analysis goes, this is the only positive trigger that can take Nifty higher, probably to 8200 to 8300 levels once again.

Once Parliament session is over (or GST bill is over), markets will look for Fed meeting on Dec 15 and 16.

Fed event is easier to handle as we know the date as well the probable out come. But GST bill is not like that.

Once Fed event is over, year end comes and mostly FIIs will like to book profits and go for holiday between Dec 20 and Dec 31.

Then comes January, Infosys will start with results. It has already given lower guidance and hence it is not likely to declare good results. That is why this stock has been falling in the last few days.

Let us look at the components of Nifty.

Banks along with HDFC has more than 35% weightage in Nifty. Reliance, ITC, Infosys and TCS together has about 30% weightage in Nifty. So it is all about Banks along with Reliance, ITC, Infosys, TCS and HDFC.

That is why when IT stocks, which declare results earlier than others, fall just after results, entire markets fall in anticipation of weaker results by most other companies.

So Q3 results which will start pouring in from second week of January is also not going to be that great.

Reasons:
1. ITC will declare bad results as their cigarette sales continue to fall, even if they declare good results as we approach budget people will be jittery about this stock.

2. Infosys has given lower guidance already and hence Infosys and TCS may not declare good results.

3. Reliance declared very good results in Q2, still it could not cross 1000. It fell. As it is in the commodity business, global bearishness will affect this stock. People will like to sell on rise rather than buy on dips.

4. HDFC results are not going to be that great as Real Estate sentiment across all metros is very bad. Even during festival periods, builders could not sell the properties. We need a very good correction of 20 to 25% in Real estate prices to stimulate the demand. Until then Real estate stocks will under perform and Housing Finance Companies may not do brisk business.

5. Banks, it is going to be the same story. People no longer look at the results. They only look for NPAs and Credit Growth. Economic indicators like PMI data and IIP data are not that encouraging. So for Banks the Q3 story is going to be same as Q2.

When nearly two third of the Nifty weighted stocks under perform,how Nifty can march higher?

So uncertainty about GST, US Fed meeting, Q3 results, Year End profit booking all are working against any big rise in Nifty except GST, if passed.

If 'NO GST' we will surely close this calendar year with negative return. Even if GST bill is passed, Nifty may still end with slight negative for the year.

So whichever way you look, the Year 2015 has not been that great.

I have not included Geo Political tensions in my argument.

So we may have better long term but in the short term and medium term we have more challenges.

Hedge Funds can make better money than long only investors.







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