In early September, when markets were going great guns, I had mentioned the possibility of a significant correction after Q2 results. On Nov 16th, I had written that NIFTY has a fairly strong support at 5800 and accordingly, at 1:14 m today, NIFTY rebounded from a low of 5825 and finally closed around 5935.
I expect the market to slide down again on Nov 24th owing to a slump in euro and owing to the global market uncertainty because of the tension between the Korean nations. Bears and short sellers will most likely have a good time today. How much it will slide really depends on the amount of institutional buying that takes place to support the market at the lower levels; not much support can be expected, since mentally, everyone is now prepared for the 5800-level to be breached.
The present round top formation of the NIFTY gets complete on NIFTY sliding to 5600 and this is where the NIFTY may head if negative global cues are continuously received over the next few days. Next support levels for NIFTY are 5840/5729/5591/5419/5368 (last 2 are very strong and rigid support levels for current NIFTY pattern).
So are the markets doomed? Good days are gone? No, I do not think so; not with the kind of growth prospects the Indian economy is showing. If the world economy revives, one of the most major beneficiaries will be the Indian companies; however, the world economy should show some strength and at least a feel-good factor.
I still think revival will start happening somewhere around Christmas and our markets will possibly reach new highs somewhere in Feb-March 2011. One should stay invested and avoid panic selling and also not be rash or too early in averaging.
6530 by April 2011 is quite a possibility and extrapolating a bit more, I still expect NIFTY to reach 6800 (SENSEX 23000) by end of calendar year 2011.
When a market is consolidating, sitting and watching is a good strategy for positions you already hold, but only if the script has good growth prospects in the future and it is still under-valued. For scripts that has already run up quite a bit and there is no compelling reason to stick to it for the future, profit booking should come naturally. Fresh buying should be done only in a very limited scale. At present, it is better to avoid high amount of buying, till the market stabilizes.
Powerfulpicks wishes success and safety for your investments in the days ahead of us. But stay cautious.
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