India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Sensex: Outlook 2011
INVESTMENT FOCUS
The Sensex was volatile in the first nine months of 2010 and threatened to violate the 16,000-support, twice in February and then in May. But such a breakdown was averted on both occasions and the mood turned gung-ho, once it broke past the 18,500-hurdle, to take it very close to its previous life-time high of 21,208.
Long-term trend
As we stand at the threshold of a new decade and a New Year, the long-term charts have never looked this exciting. We are not talking about the next 12 months. It is a given fact that the year ahead will be choppy. It is the next 10 years that could see multi-fold appreciation in the benchmark.
It is fairly obvious that following a long-drawn bear market between 1992 and 2001, a fresh bull market is now in progress. Wave 1 of this bull market ended at the January 2008 peak of 21,207. The 2008 crash was the second wave that ended at 8,047 in March 2009. The third wave of this bull market is now in progress.
At the commencement of 2010, the rally from 8,047 had not progressed sufficiently to enable us to judge if it was the B wave of the second wave, or the commencement of the third wave upward. In simple terms, we expected the bear market to have legs that could make it drag on for a few more years. But a strong move above 18,500 and the index nearing its previous peak indicates that we are in a fresh leg upward of the long-term uptrend.
The targets for the third wave that is in progress from 8,047 trough are 39,337, 58,743 and hold your breath, 90,160. This wave can terminate at either of these targets and our preference veers towards the second. Extrapolation of the move that began from 1980 low also gives us a Sensex target in the 6-digit.
And the time when these can be achieved…Wave 1 took six years and three months. Wave three can be at least as long or 1.618 of wave 1. That gives us mid- 2015 or mid-2019. That is, the next decade is going to be good for Indian equities. The long-term outlook will be roiled only if the Sensex goes on to close below 13,000. If corrections halt above 16,000, that would reinforce the positive long-term view for the index.
2011
There will, however, be plenty of corrections, both shallow and sharp, that will provide buying opportunities within this uptrend. One such correction is in progress that can keep the Sensex in the range between 19,000 and 21,500 in the early part of 2011. Our preferred trajectory for the year ahead is that the index breaks above the upper boundary at 21,500 in the first half of the year to reach 22,846, 25,177 or 28,950. The Sensex can trade in a higher range with the lower boundary at 20,000 after it achieves either of the afore-mentioned targets.
If the Sensex turns tail and breaches 19,000, it will receive strong support between 18,000 and 18,500. The next halt for the index would be at 16,000. Our preferred range for the year is between 18,000 and 25,000. The upper limit is 28,950 and lower is 16,000.
Lokeshwarri S.K
BL Research Bureau
Nifty (6,134.5)
The Nifty too galloped higher in the last three sessions to end the week 123 points higher. The uptrend that began from the December 10 trough of 5,721 appears to have resumed now. This wave has the targets of 6,170 and 6,285. The peaks at 6,335 and 6,357 will also act as resistance for the short-term. Traders can therefore book profits if the index reverses lower from these levels.
Extreme short-term supports are placed at 6,090 and 6,057. Short-term traders can hold their long positions as long as the index trades above the first support. Swing traders can watch out for supports at 5,984 and 5,883. Fresh long positions are not advised on a close below 5,984.
The medium-term view for the index is neutral in the zone between 5,700 and 6,350. Since the Nifty has moved above the key resistance at 6,100, it can now move on to the upper end of this medium-term trading range. Reversal from 6,350 will pull the index down to 5,700 again.
However, strong move above 6,350 will imply that the uptrend from 4,786 has resumed with the medium term targets of 6,680 and 7,270.
Global CuesThe curtain has come down on a rocky year for global markets that was largely dominated by the European crisis. But investors would be satisfied with the overall performance of global markets with the MSCI world ending around 10 per cent higher and the MSCI Emerging Market Index closing with 15 per cent gain. European markets were the laggards last year and the DJ Euro STOXX continues in the bear phase that began last January.
The Dow was stuck in an extremely narrow range last week but it has managed to close the year 11 per cent higher. The short-term chart pattern in the index is very positive and it can move higher to 11,867, 12,000 or 12,444 in the weeks ahead. Near-term trend in Dow will stay positive as long as it holds above the key support at 11,300.
CRB Index that tracks commodity prices is ending the year with a flourish, up 30 per cent. This index has closed in on its mid-2008 peak already, aided by rally in agri-commodity prices, crude and gold.
Sensex (20,509)
The year 2010 has ended on a robust note with the Sensex gaining 17 per cent in the year. A bout of short-covering ahead of the derivative expiry helped the index close at 20,500, just 3 per cent short of a new life-time high.
The first decade of the twenty-first century has made India a force to reckon with in the global financial arena and a booming stock market with the Sensex moving from 5,000 to 20,000 in this period has played a large role in this growth. Investors who moved in and out of equities at various stages in the last ten years would have different experiences to narrate.
But everyone would agree that long-term investing in fundamentally sound stocks pays. And our mantra for the next decade stays at; ‘ think long-term'. This view is supported by our long-term view for the Sensex printed on Page 1 under the caption, ‘Sensex outlook for 2010'.
The week ahead is likely to see market activity slowly limp back to normalcy as the holiday-makers straggle in. Strong short-term chart patterns in Dow and S&P is a positive and that can give a fillip to our market in the upcoming weeks. Volumes in both cash and derivative segments plunged last week as year-end mood pervaded the market. Even derivative expiry passed off without much fanfare. FIIs turned net buyers once more as stock prices perked up. Open interest has declined to a very low level around Rs 1,10,000.
The Sensex closed the week above the resistance at 20,300 indicated in our previous column. This has made the short-term view positive for the index and it can test its recent peak at 21,108 soon. The moot question is whether it can garner the strength to move beyond this level just yet.
Downward reversal from 21,108 or 21,207 will result in a decline to the lower end of the current medium-term range at 19,000 once again. Conversely, a move beyond 21,200 will mean that the third leg of the move from 15,960 trough is in motion. This wave has the minimum targets of 22,255 and 22,846. Sharp move beyond 22,846 will give the next medium-term target at 24,200.
The Sensex could begin 2011 on a positive note and the index can move higher to 20,625 or 20,870 in the week ahead. The peaks of 21,108 and 21,207 will act as strong resistances in the days ahead and short-term investors can cash in some of their profits on a downward reversal from this zone. Supports for the week will be available at 19,988 and 19,640.
No comments:
Post a Comment