Technical Analysis of Market Trends - February 2015 :: Edelweiss

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• We anticipated a change in market structure and had raised our Nifty target to 9000 level. The index reached near our target level on 30th Jan 2015 and witnessed profit booking. Broader market index fell more than 500pts from its swing high in a span of 8 trading sessions before resuming into the trending direction.
• Nifty has witnessed 6 sharp corrections in its daily chart post the rally of May 2014 (Lok Sabha election month). An interesting observation to be made from those corrective moves is that the index has declined with an average loss of -5.6% from its swing high before resuming into the direction of its intermediate trend and entering into a new all time high level. The recent decline in the index was also in line with its previous average losses.
• The weekly chart of Nifty continues to show higher high and higher low formation. The medium term momentum oscillator is showing bullish crossover above the zero line indicating fresh build up of momentum.
• In the recent bi-monthly monetary policy by RBI, it kept the repo rate unchanged as it has already taken pro-active action on 15th January by easing it by 25bps. The central bank did reduce the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.0 per cent to 21.5 per cent with effect from the fortnight beginning February 7, 2015.
• Intermarket analysis suggests that loose monetary policy in US is a primary driver of higher asset prices like stocks and Real estate. ECB has also pumped proper Q.E, in Jan 2015. BOJ has been fairly aggressive in unconventional monetary policy. Since all major central banks are easing, the world markets are flooded with liquidity which is expected to support equity markets worldwide.
• India’s 10 year bond yield continues to decline further as it has fallen from 9% to 7.70% in past 11 months. Decline in bond yield is bullish for equities.
• Since the market is in a classic bullish phase and every 5-6% decline in the index has shown buying opportunity. We expect the index to continue its outperformance versus its global peers and maintain our bullish bias on outperforming sectors. Bullish bets should be taken in Cement sector and some focus should be made in smallcap segment which is showing a fresh opportunity. We continue to remain bullish for the long term and expect the index to move higher towards 9100 / 9350 levels in the short and medium term.

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