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Saturday, June 16, 2012

Indian Markets at Cusp of new Bull Run!

This weekend is full of negative news elements and possible surprises. Coming Sunday may spell disaster for Greece, as they await repeat elections and may pull out of Euro zone. India eagerly awaits monsoons, experts have already given a 50-50 chances towards poor monsoons and hence a blow to rural spending and food inflation (which is already at 10% as we speak). Presidential elections in India have been nothing short of dramatic mess at highest levels. So a sweet mix of political, global and climatic shocks awaits us as we write this.

Amidst all this drama, what do stock charts convey? India is standing at a cusp of huge Bull run as per Indian stock market charts!!

We look at variety of indices in Indian markets and some individual scrips and possibly what we are looking at conveys that Indian markets are at the cusp of another Bull-run which may take indices 15-20% higher from here.  Let’s disseminate these charts one by one:

Nifty Weekly chart below shows that markets have been in 18 months of strong Bear grip. Down sloping Trend line have forced Nifty much lower from a high of 6300 in Oct, 2010 and since then in past 18 months 
Nifty has fallen to a lows of 4600 and formed a base here. The down sloping TL has now provided a support to Nifty at 4800 levels. What we are also seeing is a strong double bottom formation here. Typical bear markets in India have ended on a double bottom note and their duration has been 12-18 months. Both these conditions are now satisfied and hence Nifty is possibly standing at the cusp of another Bull-run from here.

Nifty Midcap index is a broader index of 200 Midcap stocks and hence conveys a broader picture of overall market health. Since derivatives are not popular on Midcap index, hence it is just a plain average of 200 scrips and no manipulation is possible on index value whatsoever. The midcap index on weekly charts also coveys a strong double bottom formation and possible revival of markets from here on.

Nifty Midcap chart on a daily timeframe also shows that index has take support at 3 points and has possibly formed a base which is very difficult to break. If markets are not willing to go down, they are getting ready for another journey up.

CNX-100 index is a average of 100 best stocks in Indian markets, and here it communicates the same story. Strong double bottom, unwillingness to go down and only place to go is up.

Let’s look at some sector indices, one from highly beaten Infra sector and another from strong IT sector to see sector specific behavior.

CNX-Infra, a average of Infrastructure stocks, has been in bear grip from past 18 months and fallen brutally from 3800 levels to 2200, a fall of 40%! CNX Infra has also shown a strong double bottom and hence willingness to stay at these levels and move higher.

 IT sector picture is available by CNX-IT index, and this is already in upmove. IT Index had a brief bear market of 8 months and has been steadily moving higher since past few quarters. Good times as usual for IT scrips.

Looking at some specific scrips, we look at HDIL which is a representative of midcap realty stocks. HDIL is also showing double bottom and tendency to move higher from here.

L&T, a capex story, is also showing similar behavior and possible upmove from here.

Very similar chart for JSW Steel as well.

To summarize the story, while the global markets are in mess, negativity all around and pessimism is at possible peak levels, Bull runs are about to start. Bulls will typically climb the wall of worry and markets moving forward often pull the country’s economy in forward and positive direction. India is indeed standing at the cusp of another Bull-run after a strong and crushing Bear grip of past 18 months.

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