Time For A Small Break??

Abhay has posted a query in the 'Comments' section regarding movement in Nifty and market trend. As per his comment he is expecting some cool down after recent sharp up move in last few sessions.

DEAR VIRAL,
I HOPING AND SOME WHAT PREDICTING FOR A 100-300 PT CORRECTION IN NIFTY IN VERY SHORT TERM. WHAT ARE YOUR VIEWS?
REGARDS ABHAY

Firstly, important to understand over here that the Trend has again turned in the upward direction in the near term. The break down below Nifty 4250 proved false for a sustained down trend. Nifty has bounced back vigorously after testing 3900 on the downside. Since then Nifty has fully engulfed the bearish move by rising above an important resistance of 4250 levels and now within testing distance to break above 4500 zone.

A correction of about 125-200 points on Nifty could be more likely, after witnessing a steep run-up in last week. But, again, it may or may not happen as per our expectation. Markets might as well choose to simply consolidate around current levels before next up move.

But no markets can move in single direction for a long time. So, traders should preferably look for a dip to take an entry at lower levels. During such strong momentum, even the corrections could turn out to be short lived or sometimes even as compressed in nature as intra-day correction only. Traders can buy around Nifty 4250 (which seems a bit unlikely even if markets choose to correct marginally) to 4350 zone. Accumulation of first lot of buying could be done around Nifty 4350-4300 which could prove to be a health entry point from Trading perspective. If markets choose to correct from here, traders can buy around Nifty 4350 with target of 4600-4700 on the upside, when the rally blooms again after a short correction.

On the other hand, long term investors need to wait patiently and hold on to their holdings and record price appreciation for their existing portfolio. Investors were recommended to start accumulation in Nifty 3900-3950 zone during the recent downturn. But, we missed out on aggressive buying spree as lower levels looked imminent then, but didn't turn up. At least, we were able to do some bit of cherry picking at the lowest point of the past 4250-3900 range. Investing should be a slow and a patient affair.


Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

PSU Stake Sale in Low Float Counters

Disinvestment & Valuations.

'Disinvestment'- this was the theme on which speculators played a big bet before Budget announcement. Markets participants has expected some big announcement in lines of disinvestment or stake sale in public companies. In this post, I would like to throw some light on one aspect of PSU stake sale i.e., Valuations of already listed PSU companies on Indian bourses.

Low floating stocks are those stocks where a majority of the stake is owned by promoters and its group, thus limiting the scope of shares open to trading in public. Take, for instance, listed but government owned companies like NMDC & MMTC where the Centre has a whooping over 98% stake in each of these companies. In such companies, the stock in float for retail investors and institutional investors is very low and limited. The stock price and valuations of such companies are based on a low floating stock in public, thus making investment and trading in such stocks susceptible to high volatility and lower average volumes more often than not.

Fluctuation at its most Extreme

Most of the times, fluctuations in such stocks are often locked in up or down circuits based on the flow of news in the respective counters. It is relatively easier to manipulate the stock prices of such counters based on low outstanding shares in float. Such counters can be lifted with little or no institutional support due to low floating stock in public. Usually the charts of such stocks depict a vertical rise or fall during a period or it could as well be in shape of 'Steps' where the stock's chart pattern resembles as if moving on the pre-determined side after every planned phase of consolidation.

Competitiveness & Transparency

From all above, I simply intend say that in selective stocks with low float, the valuations could be on the higher side during times when the news flow is in favour (For example, disinvestment in PSU counters) of the stock. Such stocks could move up on the school of thought that further divestment could enhance the liquidity and volumes for the counter. In stocks, especially, where the promoters are Government, the usual process of thinking that goes into it is that as more stake from government sets free and as private institutions/retail investors gets more hold of the stake in the counter, the management will gradually strengthen, become transparent and be more competitive in nature.

A Slow Process of Price Adjustment

But, the other side to the story could also be that the excess valuations and speculative interest that such counter received till now based on its low float, could somehow become lose the sheen with higher float in the public/institutional domain. However, coming back to NMDC or MMTC where fundamentals are sound, could be a good investment pick for investors but for the excessive euphoria created in these stocks just before the budget announcement.

NMDC which had slumped to Rs.115 at Sensex 8000 levels, had clawed back to Rs.450 until Budget announcement before it settles around Rs.400 zone at last week's closing tick. The stock has moved up a whooping 400% during the period under contention as mentioned above. Same goes for MMTC which has appreciated from Rs.9100 levels at lows which has ended up at Rs.31200 at last week's closing level. Both the stocks are sustaining high valuations based on their price to earning multiples.

The Buck Stops at Demand-Supply Equation

The intent of this post on the blog is not to discourage readers planning to enter low floating stocks or encouraging them to exit such counters if they already hold them. Also, it is not necessary that all low floating stocks ought to be expensive. At times, there could be counters where the float is low but the volumes are healthy.

The intent is simply to Alert the readers that in counters where there could be near-term opportunity of price appreciation in such disinvestment candidates with majority stake in government's hold; the valuations in such stocks may find it difficult to sustain at higher levels as the floating stock and volume increases for trading in the open market during the longer time span. The simple logic that could apply over here is that with low floating stock the demand for the stock far out-strips the supply in such counters.


Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Is Trend Reversal Imminent?

Volatility Revisited

A key feature of the market in last 15 days has been 'Volatility'. Stock markets at first developed a narrow range of Nifty 4200-4650 prior to budget. Post budget, as markets got a major event to react on, it breached the range on the downside taking cues from the FM's announcement or rather say lack of announcement. A crucial support got breached at Nifty 4200 levels to test lower levels until 3920 in next few sessions.

Did You Buy in Nifty 3900-3950 Zone?

The idea was to fill up the gap left open since election results i.e., Nifty 3650-4350. The gap got filled only partially up to Nifty 3900 levels. This blog had clearly hinted in my previous posting that the targeted gap need not necessarily be filled at this very attempt. An initial target of Nifty 3800-3850 was clearly spelled out. Keeping in lieu of this target, investors were suggested to start accumulating stocks in between 3900-3950 range as a start-up call.

Need of the Hour: Consolidation

Next few days, markets jumped up as vigorously as it had slumped during Nifty fall from 4250 to 3900. As mentioned in the previous post, a trend reversal is possible above Nifty 4400. Now, we're quite near to those levels and we till need to see whether Nifty 4400 is being crossed over and sustained above that. By ensuring sustenance, we'll understand that the break-out above 4400 is not a false one.

Traders can Buy on Dips, Investors can Hold on

The recently visited bearish range at Nifty 3900-4250 is fully engulfed, as Nifty has moved above 4250 with a weekly closing above the bearish range. The rise witnessed from the lows of 3900 was a vertical rise executed in only 4 sessions. This may call for some consolidation and range bound movement preferably in narrow range of Nifty 4250-4450 in short-term horizon or a broader range of Nifty 4000-4650 over medium term horizon. Keeping these ranges in view, traders can buy stocks at lower levels on dips or nearer to their respective support zones. Investors can hold on to their long positions unless there is re-emergence of any sort of bearish break down.

Leave Your Comments

Before concluding this post, let me pose a 'Thinker' for the readers. Readers can use their free time to ponder upon following aspect on the markets: The post-election gap on the charts at Nifty 3650-4350 has been partially filled up to 3900. The remaining gap of 3650-3900 is still pending to be filled in future. Will it be filled in near-term or will it be revisited upon in medium-term? Also, is it possible that markets can completely get away without filling this gap? The gap is still a substantial 250 point range. You can as well leave your views in the 'Comments' section.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

The Melting Point... Nifty Corrects Further

Treading on a Thin Rope.

Nifty back to 4000 levels. It went almost 30 points below 4000 during the last hour of trade on July 10, but got averaged out a trifle above 4000 in last 10 minutes of adjustment period. On Thursday (July 9), Nifty made a futile attempt to cross 4105-4125 zone for multiple number of times only to end lower and in the process not witnessing that crucial cross over.

Again coming back to July 10, Nifty made last attempt to cross 4125 during the first half of the trade, but all in vain - it didn't manage to cross the crucial hurdle of 4125. Thus, nifty made level testing of 4125 levels twice in last 2 trading session only to end lower. This provided enough indication that Nifty (read Markets) was witnessing a constant supply of paper at lower levels, unwilling to wait even for a minor bounce back.

What Next ??

As mentioned in my previous post, Nifty seems slated to test 3800 levels in short-term horizon. The journey from Nifty 4000 to 3800 need not necessarily be as swift and fast as we witnessed from Nifty 4400 to 4000. But, quite possibly, we could see some consolidation in between 3900-4250 (perhaps even 3900-4125), before moving forward to attaining Nifty 3800 or even sub-3800 levels.

When Should Investors Start Buying ?

Investors were alerted (in the previous post) as to not to indulge in catching the falling knife when Nifty breached an all-important 4250 levels. However, they can indulge in small quantity accumulation in Nifty 3900-4000 range, preferably as nearer to Nifty 3900 levels as possible. Presuming that Nifty might take some support at 3800-3850 levels, investors can accumulate in small quantity below 3950 levels. The second tranche of buying to be done around Nifty 3600-3700 zone.

A point for Investors to note is that even if they don't get the opportunity to accumulate their favourite stocks around Nifty 3900 levels in very near-term, they could rest assured that for any substantial upturn to occur Nifty has to cross 3 significant Resistances situated around 4125, 4250 and 4400 levels. Also, the upward ride to cross all these 3 resistance would not be a unilateral rise and it would be a slow, wacky and a consolidating move.

Yawning Gap

But, there is no surety that Nifty will sustain a support at 3800 levels. A yawning gap on charts have been left post-election results. A jump from Nifty 3650 to 4350 was a huge 20% gap-up opening on the day Congress-led UPA Government was re-elected on Centre. This gap needs to be filled up on charts sooner or later. Half the gap has been already filled from Nifty 4350 to 4000 levels, remaining from 3650 to 4000 still pending.

However, it is not necessary that Nifty might make an attempt to fill-up the whole gap at this very attempt. It may take longer time depending upon market trend and mood. Markets have a knack of giving its participants a feeling that it moving ahead to do that pending repair job of filling the gap, but it may well decide to do it later. The idea to convey over here is that the repair job needs to be done, but not necessarily at this attempt and at current juncture.

Rocky Resistances

Lastly, to point out over here that now markets have 4 hurdles to pass for indication of any kind of bullishness. A primary level would be Nifty 4125 which proved to be a hurdle on weekly basis. Second hurdle is Nifty 4250 which was an active support for the old Nifty range of 4250-4650. however, that support turns out into Resistance unless Nifty rules below it. A Trend Reversal could be witnessed above Nifty 4400 levels and a confirmation that we are moving ahead with a rally for a substantial rise could be procured only above Nifty 4650.

Fundamentally Sound

If markets correct substantially, here is a list of Mid-cap stocks to keep an eye on from strictly Long term perspective. Accumulation to be done in small quantity on dips, staggered over a period of time.

Thermax, Moser Baer, Kalindee Rail, Videocon Ind., Adlabs / PVR, Gitanali Gems, Alok Industries, Biocon / Glenmark, Financial Technologies, I-Flex / 3i Infotech, IVRCL / HCC / Patel Engg., Punj Lloyd / GMR / JP Asso, BOB / BOI / Indian Bank, Voltamp Transformers, I.B.Realestate / HDIL, Educomp / NIIT Ltd., Time Technoplast, Aditya Birla Nuvo, Deccan Chronicle, Crompton Greaves, Pantaloon Retail, Reliance Capital, Praj Industries, Jain Irrigation, Aban Offshore, GE Shipping, Everest Kanto, Opto Circuit, United Phosphorus, IDFC /PFC, Bartronics, Sesa Goa, BEL.

Note: The above list of Mid-caps is not a recommendation to Buy stocks. It is just a list of few mid-cap counters for investors to focus during down turn as probable buying targets when their valuations touch lucrative and reasonable levels. While some of the above mid-caps are already quoting at cheap levels, some others are not so cheap at current levels.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Bucket Full of Expectations !!

FM hints Reforms but at a Steady Pace

An important event in Union Budget came and went by. Before its announcement by FM Pranab Mukherjee, some thought that the budget would finally pan out as a non-event. While some held the view that it would act as the final frontier for next leg of rally. Yet many others felt that this would be the last hope on which markets would sustain this high before correcting substantially.

The announcement of the Budget event was simultaneously followed by a sharp slide in equity markets- conveying that they're not satisfied with the Budget from a government which has a much clearly pronounced mandate from the public to take the Reform route after a thumping victory in the Elections.

Clearly, the markets had factored in various types of Reforms & Disinvestment agenda from the newly elected government on the centre. This time with a whiff of a relief that the coalition is much stronger to ride through the rough waters for the next 5 years.

FM Pranab Mukherjee chose to keep this Budget a low-key affair without focusing much on Reforms and Disinvestment. A clear focus of the government was reflected on the sustenance of Growth of the Economy by stimulating growth through inclusiveness of Rural programmes and policies. However, from the signs in his Budget and post-budget speech, he has affirmed the view that Disinvestment are not completely out of agenda and that they would be taken over as and when felt fit by the government depending upon the conditions.

Quite possibly, markets were factoring in too much too soon from a finance minister which is in its first few months of taking control. And, not necessary that the government should act and open-up all possible reforms in its first year of operation. It should be a gradual and a well though out process which should grow over a period of next 5 years.


Technical Stand on Markets:
(Nifty Range: 3650-3800-4250)

Nifty was range bound in 4200-4400 levels for almost 10 days. One session before the Budget, it showed signs of break-out above 4400 levels but could not sustain from the assault of a major event like Budget. In fact, post-budget the Nifty seems to have even breached the downside support around 4200-4250 zone. Now, it could be presumed that a narrow trading range of 4200-4400 is disturbed with a downside bias.

The highs of previous 2 sessions perched at Nifty 4460 will act as a strong Resistance for any possible up move. Near-term Resistance stands at Nifty 4350 level. Medium term Resistance for Nifty stands at 4650, which is a remote possibility of being tested in near term & could be ruled-out from the game as of now.

Whereas downside gates are open up to as low as Nifty 3800-3650. Nifty 3670 was the level from where the markets had bounced 600 points after positive election results. These levels could come handy as a support zone. There is a Gap of 600 points in between 3650-4350 which is partially filled upto 4150 and needs to be wrapped up fully over a period of time. Nifty targets of 3650-3800 on the downside could be a slow process or even a fast one if aided by global weakness.

In short-term horizon, Nifty target of 3800 seems quite likely as compared to 3650 levels. However, a gap fill-up upto 3650 can't be ruled out over medium term horizon.

The Above levels are forecasts for future and levels to watch out for, but not necessarily the certainty for the next market movement. These are still early days for markets and we need to see whether there will be an actual breakdown from the range as presumed and narrated above. Global cues and Quarterly results starting from next week will now play an important role in determining the trend from here.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.