BROAD MARKET OUTLOOK FOR NEXT 2-3 MONTHS & MARKET VIEW FOR THE WEEK 18TH JULY 2011 TO 22ND JULY 2011

)ITS CRUCIAL TIME FOR ALL THOSE WHO ARE ACTIVELY PARTICIPATING IN THE INDIAN STOCK MARKET. FOR LAST 18 MONTHS INDIAN MARKETS HAVE UNDERPERFORMED RELATIVE TO THE SENSEX EPS AND GLOBAL MARKETS. FOR QUITE SOME TIME, SAY LAST 7-8 MONTHS THE GLOBAL FACTORS HAVE CONTINUOUSLY BEEN WORRYING & HAUNTING THE INVESTORS, TRADERS AND OTHERS AS WHAT WILL HAPPEN ???? 


WILL MARKET BREAK-DOWN BELOW 5200 OR BREAK-OUT ABOVE 6000????


WHAT SHOULD I DO, IF THE MARKET REMAINS IN THE SAME BROAD RANGE?????


WHERE SHOULD I INVEST, GOLD, SILVER, M.F., STOCKS, BONDS, BANK F.D OR KEEP CASH IN SUCH A POOR TIME????


 IF I BUY ANY STOCK IT COMES DOWN AND WHEN I HAVE SOLD IT HAS STOPPED FALLING???? NOT EARNED A SINGLE PENNY IN THE MARKET.


I HAVE HEARD IN T.V ANALYST RECOMMENDING TO BUY FOR LONG TERM BUT I HAVE BOUGHT SHARES 4-5 YEARS BACK, BUT STILL THEY HAVE NOT PERFORMED, EVEN THEY ARE BELOW THE PURCHASE PRICE, WHAT SHALL I DO? WHAT IS THE BENEFIT OF HOLDING FOR LONG TERM?


ANALYSTS SAY THAT THEY ARE BEARISH IN THE SHORT TERM BUT BULLISH IN THE LONG TERM, BUT HOW SHOULD I GET CONVICTION, WHEN THERE ARE SO MANY GLOBAL AND DOMESTIC UNCERTAINTIES????


WHO CAN BE BETTER GUIDE TO ME FOR ADVISORY? T.V CHANNEL, PAPER OR MAGAZINE, WEBSITES, BROKER'S RECOMMENDATION, SO THAT I CAN PICK BEST STOCK, WHICH IS RELATIVELY SAFE AND MAKE MY MONEY GROW ON SUSTAINED BASIS?????


ANSWER TO THESE QUESTION ARE VERY CRITICAL AND HARD, HOWEVER ATTEMPT HAS BEEN MADE TO REACH TO THE PROXIMITY OF TRUE AND FAIR VIEW, SO THAT IT COULD HELP TO CONCLUDE.


FOR THE SAKE OF THE CONVENIENCE  ANALYSIS HAS BEEN DIVIDED IN FIVE PART:
1. Global Factors
2.Domestic Factors
3.Fundamental Factors
4.Technical Factors
5.Astrological Factors


1. GLOBAL FACTORS:There has been several global uncertainties these days, which are worrying the stock markets of the world for last few years, but they have become more grave with the afflux of time. The most recent and worrisome problem pertains to the EUROZONE. Greece will certainly have to take a hair cut on its rapidly expanding burden of sovereign debt. That means either there will be restructuring or technical default. They are trying to defer that for as long as they can, but given the debt trajectory of this small country and lack of indigenous manufacturing capacity, the likely hood that it will be very difficult to implement the fiscal austerity given the social backdrop in the Greece. Hence some restructuring or default is inevitable even though the world markets have anticipated this however, probably some surprises would still shake the market. Remember Markets don't like surprises. Now comes Spain and Italy.Global Analysts believes that Spain is more worrisome than Italy and Poitician around the world are driven by their own incentives which are very much dependant on the length of their respective election cycles.The short election cycles(say 2 years) are very destructive in terms of implementing decisive stretagies in dealing with the tough economic problems. They force politicians into a bailout mentally, simply at buying time and  Europe is facing with similar problem, where there is stress on liquidity problem, and not on the solvency problem, which they actually have.Hence almost every European country is having prolems. This might lead to collapse of Euro and there will be knee-jerk reaction in the world markets, which will lead to pessimism among investors and lead ultimately to risk aversion. Now understand that 'RISK AVERSION' is never never liked by markets. FIIs investing in Emerging Markets may withdraw the funds aggressively on redemption pressure and that could lead to sharp correction in India too. 8000 crores have been pumped in by FIIs in july itself. IF THERE HAPPENS ANY THING LIKE THAT THEN THIS MIGHT LEAD TO SHARP CORRECTION AND SELLING ACROSS THE BOARD, WHICH MIGHT TAKE NIFTY BEOW 5200 MAY BE 4800 ALSO.


Coming to America, its very very important how QE3 comes. Its is to be seen if the US Congress doen't  pass the debt borrowing increase limit then where does the FED find the money to buy back their own debt and securities and pump in the money back into the economy? Hence by 2nd August if they do not concluse their extension of borrowing then some of the international rating agencies might be forced to reduce the rating and it will have huge implications globally making the markets pretty volatile. This may force some sharp selling in the emeging markets by Hedge Funds and lead Nifty to drop down significantly. If the QE3 is given then the question comes, will there be allocation of funds in Emerging Markets. If such thing happend then in India, we might see sharp Rally in equities, surprising the investors.
Also China is trying to slow down which has its own impact on various commodities. This may bring down the prices of commodities and consequently high beta metal stocks may fall.


2. DOMESTIC FACTORS:Domestic issues like corruption, black money and other economic issues like interest rates, inflation, commodity price volatility and foreign exchange will continue to concentrate on the domestic sides of growth which are challenging. 


The poor IIP numbers fr May 2011, at 5.6% clearly shows the signs of slowdown due to continuous hike in the interest rate by RBI. In order to contain the inflation at the cost of growth, shows the slackness on the part of government, dampens the sentiment in the stock market due to falling margins of the companies of all mojor sectors like banks, auto, real estate, etc.


Investors will aslo watch the progress of Monsoon rains after being 19% below last week.Weather Deptt. expect an improvement in the rainfall next week.


RBI will meet on 26th July for its review of inflation and interest rate hike. At this point of time,  analysts are expecting a 25 bps hike but the developments in the Europe might change thier outlook. If the bad news continue to come from Europe the they think that there is possibility that RBI may pause instead of hiking that 25 bps interest as they are expecting. At most analysts believe that interest rate cycle shall peak out around 8% repo rate, which is currently at 7.5%. They expect WPI to remain in the range of around 9% untill september and then begin to moderate, but will still remain at fairly elevated levels. WPI which represents the input price pressures more tha the finished good price pressure may remain high and lead to interest rate not coming down in near future. NOW IF THIS HIGHER RATE OF INTEREST SUSTAINS FOR A LONGER PERIOD OF TIME THEN ITS CERTAINLY GOING TO HURT THE GROWTH IN A DRASTIC MANNER. THERE MAY BE MORE CUTS IN GDP FORECAST FOR SOME TIME NOW.
This may lead to lack of buying by DIIs( which are already selling and not buying) and FIIs both. Again Nifty may fall below 5200 and drop to 4800 area. Hence this is the biggest domestic risk for which the market is on wait & watch policy.


3. FUNDAMENTAL FACTORS:Analysts believe a slowdown across the board in terms of EPS growth and that is both on the developed and emerging markets side. Many believe that EPS growth in emerging markets conomies will slow to about 18% in 2011 and 13% in 2012 from 38% the last year. However this could be revised up or down quite a bit hence these figures should be analysed keeping the view that going in the second half of the year is there any risk of disspointment at the end of the year? It may be 'Yes' or 'No', but for the time being there are more bit of risk. See the Infosys result. U.S reporting season will be very important as it will set the scene for the rest of the world as well. Hence here the earning numbers will guide the propects for stock picks. Fundamentally markets shall be  range bound. The broad range of the markets shall be 20000 Sensex( 5900-6000 Nifty) on the higher side and 16000 Sensex (4800-4700 Nifty) on the lower side and IT HAS BEEN MOVING IN THE RANGE OF 17500 AND 19500. 


HENCE THE ABOVE RISKS COME INTO PLAY SEPARATELY THEN THERE WILL BE GRADUALL DRIFT IN THE MARKETS TO 5200 OR BELOW AND ON THE OTHER HAND IF MARKET FINDS THAT THESE RISKS HAVE COME SIMULTANEOSLY THEN THERE WILL BE  CUMULATIVE 


4. TECHNITAL FACTORS:However technically marlet is trading between the 200 DMA (around Nifty 5730 & Sensex 19100) and 50 DMA(around Nifty 5500 & Sensex 18450). Hence market is trading above short & medium term average however below long term average (around Nifty above 5950 & Sensex 19800) which gives clear indication that though short term and medium term trend is up long term trend remain down, which shall be up only above the upper figures mentioned. There remains the strong resistance around 19000-19200 in Sensex and 5730-5760 in Nifty. Any close of Indices above the above zone will confirm the trend reversal (as all three trends-short,medium and long term, will be up) and then nifty could zoom to 6000-6100. 
On contrary any close below 18000 in Sensex and 5400 in Nifty will result in break down to 17300 in Sensex and 5200 in Nifty. In decisive close below 17300/5200 in any unfortunate event(s) may lead to collapse of markets till 16400 in Sensex & 4800 in Nifty. Which is extreme possible case and remote, at which it will be BEST BUYING OPPORTUNITY FOR HUGE GAINS IN SHORT AS WELL AS LONG TERM.


CONCLUSION: After analyzing all the above factors, it could be concluded that it will be safe to remain relatively with higher cash rather than stocks, as there could be drop down any time (as no body knows about when the global risks creating havoc). One could remain invested with 20%-25% in stocks and rest in cash. Markets could move higher before it comes down in the short term however any significant dip below 5200 in Nifty could be a very good buying opportunity.......


ASTROLOGICALLY: Mercury will be retrograde from 3rd August(from Leo 7degree) till 26th August(Cancer 24degree): will be a remarkable period in the stock markets of the world. There will be a very big-big deception. In Hindi deception is called"Dhokha" and it could be termed as false breakout or false breakdown, which may lead to utter confusion and surprises.This period will support both Bulls and bears both. The range for the Nifty will be 6000++ on the higher side and/or 5300 or less on  the lower side. There will be a tug of war between the bulls & bears and it will be very hard to earn in this market. Hence all the traders, punters, speculators are advised to trade less or stay out during the mercury retrograde. Mercury retrograde leads the market to no where. IF IT GOES UP FIRST THEN WILL GO DOWN AND THEN AGAIN COME BACK FROM WHERE IT HAS STARTED. Suppose Market is at 5500 when Mercury retrogrades, then it may first go upto 6000 then come back to 5000 and then again back to 5500 or conversely from 5500 to 5000 first then to 6000 and then to 5500, from where it has started.( This is an example to show how the mercury retrograde behaves and not the prediction)........ ....................
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NOTE: Reamaing................ in Part 2 to be given on Thursday 21st July,2011


MARKET VIEW FOR 19TH JULY 2011:
 Negative Global cues caused Indian markets to trade under selling pressure. The Sensex closed at 18507 down 55 points and Nifty closed at 5567 down 14 points. Mid-cap and Small-cap index were up and FIIs were net sellers at the end of the day.


As it was expected that Nifty will be in the range bound trajectory with the narrow  and it traded with the small range in between 5551-5596 with the low volume and settled at 5567. Trading range for today will be 5525-5610, with resistance at 5630 & 5670 on the support side Nifty may get at 5495-5500 and at 5440.Bias of the Nifty shall be weak today also.


Strategy for today: If Nifty opens weak today on poor global cues, one should buy Nifty Calls around 5500 levels. BUY CE5500(JULY SERIES) for booking profits on Wednesday and Thursday.


Astrologically: In this week Monday & Tuesday(18th July & 19th July) shall be weak. Wednesday(20th July) 1st half average side ways , buying in late hours. Very Bullish on Thursday(21st July) and sideways to flat on Friday(22nd July). Hence Buying CALLS(OPTIONS) & SELECT STOCKS on Tuesday on any dip shall definitely give profits on Thursday and Friday.


Following are some strategies in F&O: 
1. BHEL CE1950(JULY): Buy this option around 40-45 for the short term target of 85-90+++ in this series.
2.Patel Engg Fut(July): Short this future around 151-154 with stop loss above 159 for the target price of 135 or lower in this series.

Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.Nothing in this article is, or should be construed as, investment advice.

Disclaimer: 
This is neither an offer nor a solicitation to purchase or sell securities. The information and views contained on this blog are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in, or have positions in the securities mentioned in their articles. Neither I (Vikas Srivastava) nor any of the contributors accepts any liability arising out of use of the above information/article. Reproduction in whole or in part without written permission is prohibited.