bazaaredge.com Market Outlook Monday 22Aug11

As anticipated, the Indian market mirrored the steep fall seen across global markets with the BSE Sensex sinking by over 300 points and the NSE Nifty sinking below the 4850 mark. The sentiment for world equities and commodities weakened amid relentless concerns about slowing economic growth and fiscal stress in the western world (read USA and Europe). A downgrade of global economic growth by Morgan Stanley also seems to have spooked global markets. The Wall Street firm has warned that the US and Eurozone are close to a recession. It was also disappointed by policy action in the US and Europe amid worries about the worsening fiscal situation there.

 

For India too, the list of problems has swelled amid no sign of relief on the inflation front and the RBI persisting with its aggressive policy stance. An average monsoon, moderation in the economy, slowdown in key overseas markets and dismal progress in disinvestment has also increased the risk of higher-than-forecast fiscal deficit

 

At 6,300 everyone was talking about 7,000 levels and right now at 4,800 every one talks about 4,000. There is no element of surprise as at the end of every peak and bottom we see such mindset of market players.  During such time we tend to take help of Technical analysis and look at indicators and calculate Fibonacci ratios. All these indicate that a major bottom is round the corner. Indicators are at highly over sold zone. Fibonacci calculations indicate a major support at 4,750-4,800 levels. There may be some accesses but anyone buying at this level for 6 months to 12 months will certainly make a decent gain.

 

We suggest following stocks for investment: - Tata Steel, Tata motors, Infosys, TCS, Wipro, Ranbaxy and Sun pharma. If anyone wants to take a safer bet and avoid individual stocks, I strongly suggest buying Nifty basket in the form of ETF units. It will distribute the risk factor to 50 stocks and will adjust your portfolio by reducing underperformers and increasing out performers

 

For the next week, focus would be on the global markets. The Federal Reserve meets at Jackson Hole and the outcome may give some clarity on how does it plan to stimulate the US economy. Closer home, there is uncertainty on the passage of various reforms, despite the fact that, the Government has lined up a few of them for the monsoon session. Consequently, market expectations are low regarding passage of key reforms in the immediate term. The markets are grappling with several issues (domestic and global). However, investors must consider that even as the momentum is negative and volatility is high, valuations are turning reasonable for long-term investing.

 

`Nifty fortunately closed well above the day low. Technically the stock is oversold in its daily and weekly charts while monthly charts are showing some more downtrend. Next we are going to see the August F&O expiry which will give some support to our markets. However 4,800-4,786 remains a crucial level of Nifty

 

There is no clarity on European crises as well as US Debt issues and also back home there is a major political mess going around. These factors are directly affecting Global markets where it`s more of uncertainty that`s creating panic across the globe. Investors are still thinking ``How long should I hold my stocks. 

 

Major supports in the market from the current levels are placed at 4,770-4,720 levels. Immediate resistance comes around 5,120 levels.

 

 

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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report

 

 

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