CASH IS KING

                                                                                                             20^th November, 2012.

CASH IS KING

As per my earlier write up which appeared in Marathi News paper LOKSATTA “Manat Mandi Market madhe Teji” Dated 27^th August 2012. I categorically mentioned Market is in bull phase. Keep 5,200 as stop loss for long term investors. And 5,400 is the area to hold to keep market bullishness intact. After crossing 5,600 on Nifty probable target is 5,800 to 5900.Here Short term investor book profit. And enter at lower level. Now let’s check authenticity of this write up.

On 27^th Aug. Nifty was around 5,400.from their dips to 5,215. After taking support at this level it bounce to 5,400 areas. On 14^th September. Government declares its long awaited (Prolong) financial reforms in sectors like Retail, Aviation, Insurance, and Pension. In these ‘HAPPY DAYS’ monsoon, and ‘GAAR’postponement added fuel in fire and Nifty achieved its pending target of 5,800.

Now what next? Whether Nifty achieved its final target or some room is left? What will be Nifty/Sensex final target? What levels to be held on Nifty where by Bullishness kept intact. (Hold head above the water level.) With the help of “Technical Analysis” studies I am going to address all above queries.

As per the “DOW THEORY” With in one year market may form Top or Bottom. It’s a turning point for on going Bull/ Bear Rally. Friends, if you remember exactly on 20^th December, 2011 Market formed bottom around 4,531 on Nifty 15,135 on Bse Sensex. Next month we are completing 1 year so now we are nearby area to form top. Now I am keeping two possibilities in front of you.

Possibility No.1:- After achieving 5,800 on Nifty. Market must retrace up to 5,550(In fall Nifty must hold 5,550) In Coming days fall if Nifty is holding this level we are witnessing a new high around 5,950 to 6,050. This is the logical target for Nifty. In Euphoria Nifty target may be around 6,150 to 6.200. After achieving this target market may come across “PANIC FALLS” (Probably after Budget March 2013.)

Possibility No.2:- In days to come if Nifty unable to hold 5,550 and take support at 5,400. Then Possibility of new High is remote bounce will come up to max. 5,800. Here Nifty may form Double top. And fall may start.

IN NUTSHELL WATCH 5,550 LEVELS ON NIFTY AND ON BSE SENSEX 18,256.

If Nifty is holding 5,550. Then in days to come we are registering a new high in vicinity around 5,950 to 6,050. Or euphoric top. There after witnessing a “PANIC FALL”

 REASON FOR PANIC FALLS.

1)      At present Dollar is 55. In days to come if dollar is staying above 55.its Alarming bell in 2013 Dollar possible target is 60. Recall old memories when dollar reach   to 57. (June 2012) lots of steps were taken by R.B.I. to tame this rise. Like aggressive Dollar selling by Petroleum Companies, Banks, Ban on Speculative trading.etc.

2)      In Technical Analysis we refer “HISTORY REPEATS AGAIN.” Majority times  Tops or Bottoms were form in month of November,December,Janauary.This is some Interesting data.

(A)  2008 Mother of all recession prior to that on10^th January 2008. Indian market form Historic Top. On BSE 21,206 & On Nifty 6,357.

(B)   Last year on 20^th December, 2011. Market form Bottom. On B.S.E. 15,135 & 4,531 on Nifty. (On going Bull rally seeds were sowed at that time and as per Dow theory we are completing  one year  in next  month “Turning Point

(C)   Recall memories of 2010 Diwali. On 5th November, 2010 Sensex                      Challenge 2008 Historic Top. But unable to cross. (On B.S.E. 21,108.                          On Nifty 6,338)

(D)  In December 1991. Bse Sensex was Just 1,800. After election Mr. Narsivarao became P.M. and the then F.M. Mr. Manmohansingh (at Present P.M) presented Budget with in 4 month Sensex Doubled reach To 4,546. (In History it is labeled as Harshad Mehta rally.) Now if history repeats again then we are on turning point.

      3)   Feb.2013 Budget is the last pre Election Budget. Where by Fiscal Dieseline will keep aside and thrust is on poularistic Budget. Lead to vicious Circle (Fiscal deficit, Inflation and High rate of Interest.)

     4)    When Europe will come “Out of the woods” or Worst is behind them? Ask this question to Astrologer—instead of Economist.

     5)    Long awaited Rate cut by R.B.I. is on cards this December Policy If it comes 50 Base points it will cheer to every one but if it is not so then it will disappoint.

                                                       

From all above facts and figures in your mind you are now sure that you are near to the “TOP END OF THE MARKET” so, what needs to be done is in short                             NEED OF HOUR.

            Take the assessment of your Portfolio e.g. If you Invested Rs.5 Lacs in last 2yrs. Take a present valuation of your portfolio. Start booking profit in shares in which you are in profit. In every rally sell 25% so your average is near to High. Believe it on me nobody in market is able to catch Top or Bottom. All are near by Stop buying for long term. Trade on a short term basis. Keeping in mind 10% to 15% return with Strict stop Loss. When there is Euphoria start selling share which are slow moving because we are given maximum time to perform. Ask this question to your mind. In this super fantastic rally if share is not moving then when it will move? In bear market ? no question. So realize the fact and be on cash “CASH IS KING”

Now I am sharing my Technical Count.

As per Fibonacci Time Cycle Study 7^th December 2012 is Important Turning date if Nifty is between 5950 and 6050 and halted then assume market has formed the top. If Nifty is unable to cross this level in coming week say 10^th Dec. to 14^th Dec. then you will get top confirmation. Be on cash (In month of Dec. 3, 7 to 10, 27^th Dec. are Imp. Fibonacci turning dates).

Counter Strategy:-

If there is very heavy inflow from FIIS Like happened in January and February 2012 (Nifty rose from 4,500 to 5,600) then there is limitation for this count.

2^nd Alternative count :- is time being Nifty may form Top retrace upto 5700 and final attempt up to 6050 to 6200. Here unbelievable target 6,500 is New top for all this bullish count Nifty has to stay above 5,600 (fall below 5,600 is Strict Stop Loss for all buying positions).

In nutshell observe 3,7^th to 10^th Dec. Watch Nifty probable High (around 6050) if it is unable to cross those high in coming  week this is signal to Investor that market has formed Top for time being.

In these days I remember Investment Guru Sir Piter Lynch’s historic quote.

“Bull market born on Pessimisms, grow on skepticism, mature on optimisms, and die on Euphoria. So best time to sell is Optimisms and Euphoria. That’s what we are experiencing.

Ashish Thakur.

(Columinist, H.N.I. Consultant & Faculty (M.B.A.FINANCE)

 (Imp.Note.:- This write up has appeared in marathi newspaper Loksatta on Nov. 26, 2012.

This write up is for information purpose for M.B.A, FINANCE students. On this write up if any STOCK MARKET position is taken neither Ashish Thakur nor his write up is held responsible for any financial loss please note. Please consult your financial advisor before taking any position.)