*******This was the mail sent to Paid Subscribers on Monday***********
From last two week’s our market predictions turns out to be 100% correct, we believe you must have noticed it and benefited from it.
The direction of the Indian market rests on what global markets have put in over the next couple of days. If the US markets have a good run for the next two days then this rally may extend a bit more. But whether this rally will extend beyond 3,000 Nifty is still uncertain.
Trading activity is likely to be hectic this week also mainly due to expiry on 27th Nov. The overseas cues have been positive, which should lead us to a good start. However, going forward, the derivatives expiry and hopes of some policy announcement from the Reserve Bank of India (RBI) will keep investors on their toes.
Technically, the index is likely to continue pullback of 5-6% from the current levels, i.e. we could move up to 2,850 levels, above which the index may surprise us with a rally right up to 3,200-mark. However for a sustained up move, the index needs to trade firmly above the 2,850-mark.
After being hammered from 3,300 to 2,500 the Nifty could get back to those 3,000-3,200 levels but this rally would only last a couple of days and then the level would drop back down to 2,500 again or maybe even lower.
HBJ Capital’s Views for Monday:- (Spot Nifty ~ 2700 level on Friday)
Indian stock markets are expected to open gap-up ~ 2% , this is due to positive global clue, there would be some selling pressure by FII at the higher level and market might take a dip, still in positive zone. By second half Nifty is expected to move further higher and it will close above 2-3% upside only.
Strategies for Traders:-
- Hold if you have Nifty LONG/CALL – As per our reco last Friday, those who were holding Nifty SHORT/PUT last week must have exited on Friday with good profit. In case if you have bought Nifty Future or CALL Options on Friday, then just hold it on Monday and exit only if market moves 3-5% upside on Monday.
- Don’t take fresh Nifty LONG/CALL if market opens up 4-5% – Traders with a penchant for risk however can consider going long on Nifty future if Nifty opens up between 1-2% upside keeping the stop-loss at 2500. As long as 2550 is not broken, the Nifty future has the potential to go up.
- Don’t go for Nifty SHORT/PUT if market closes with 3-5% gain. We are expecting positive momentum to continue on Tuesday too unless anything unexpected happens. Medium term mood is still bearish, so may be in couple of days you will get chance to build SHORT on Nifty again, we will keep you posted on this.
Some brisk purchases by brokers to cover their short positions and hopes of an interest rate cut by the Reserve Bank helped the Sensex snap a seven-day losing streak on Friday. The talk of fresh measures by the government to boost growth also aided the sentiment.
Expecting some announcement on this front over the weekend, domestic traders aggressively covered short-positions, even as foreign institutions remained net sellers. Softening of inflation, and proposed liquidity infusion measures by the finance ministry also improved sentiment.
Any clarity on Citi’s restructuring is good news for markets. “It is a positive…if anything of this sort (merger of asset sale) happens, one more uncertainty goes away”. Fund managers, however, note that if Citigroup does not announce any measures on its restructuring plans, the market is likely to reverse its Friday’s gains.
In another attempt to stem India’s economic slowdown, the RBI may, this week, announce more measures to ease money supply, which is expected to ease lending rates. Analysts feel investors would take positive cues from any such move in the near-term, but do not expect the optimism emerging from such measures to stay for a longer period.