Monday, October 12, 2009

STRATEGY TO DEAL NIFTY



Quarter results have started coming. In the next couple of weeks all the results will be out reflecting the picture of the Industry as well as the Stock market. Many of my friends have asked me that what should be the strategy when the results are coming out and the expected market movement. This article will provide a small guideline.

SECTOR FOCUS: PLAIN VANILA PICKS WITH LOT OF CREAMS.
We all know that advance tax figures got a growth of Corporate were up by 14.7%. Total advance tax collections in the second quarter stood at Rs 49,501.80 crore as against Rs 38,367 crore in September, 2008.If we search deeply we find that the top companies who paid highest corporate tax we find that the maximum rise in banking was recorded by State Bank of Hyderabad (206 per cent), Bank of India (199 per cent), Canara Bank (170 per cent), Oriental Bank of Commerce (97 per cent), Union Bank of India (92 per cent), Corporation Bank (63 per cent) and Axis (58 per cent).
Other firms that showed huge rise in advance tax payments include RIL (69 per cent), Bharti Airtel (221 per cent), Infosys (100 per cent), Maruti (98 per cent), PFC (52 per cent), Grasim (233 per cent), TCS (172 per cent), HAL (67 per cent), Bajaj Auto (89 per cent), Siemens (69 per cent) and ACC (257 per cent).
So even if we find these companies under pressure in the current scenario they companies are well placed in term of valuation and growth. So if one keeps a close eye on these stocks one will be a gainer in long term. Now many of us want quick money so long term here depicts 6 months time frame. So if we invest in these stocks we will get healthy increase in our investment. Now the expected growth depends upon your Appetite. All it can be said invest in the above mentioned scripts and bother too much about their current under pressure. Just understand one basic Thumb rule. Companies who have posted higher advance tax are much aware of their own Condition, so they have well planned growth strategy even despite the current scenario under pressure.

NIFTY LEVELS: TECHNICALS
We also find that Nifty is over stretched along with Asian Stock Markets. A correction in the valuation is much awaited but we don’t find any such thing. Market have zoomed up to 17000 levels and nifty 5000.the nifty level of 4800 is a strong support. Above this level you will find huge volatile movements. Nifty 4750 will be broken once bad news flows into the system. We expect bad news from US economy and burst out of China market as the valuation of china is too much stretched. Among the greatest potential threats are political concerns. Which includes will China be able to continue with its uneasy cohabitation between a communist political regime and a capitalist economy? If nifty breaks the next support will be 4550 and below this level needs a series of Bad News. Significant correction in the Nifty, could see the index drop to 4,760 (20-day daily moving average) and 4,525 (50-day daily moving average).

Quite a few key technical indicators — Moving Average Convergence/ Divergence (MACD), Relative Strength Index (RSI) and Stochastic Oscillator Slow are in overbought zones
In general the market will be volatile and investors will book profit frequently and this will exert pressure on the market. So don’t panic due to this type of pressures. Investors will exit bad quarter results performers and will jump to take advantage of the sudden hips and bounce of good performers in quarter results. Even if we analyze the Put call ratio we find that Nifty October expiry is having a put call ratio of 1.05 where as November series have a put call ratio of 1.10 and December is extremely high of 6.58.So put call ratio depecits that a mild correction is in the wings as ratio above 1 indicates bearish trend

STRATEGY: INVESTMENTS AND STOCK PICKS.
Sectors where one can invest is Banks, Auto, Capital Goods and telecom. Your strategy should be pick up stocks of Large cap predominantly and top mid caps having good valuation of growth.

The reason behind such a plain vanilla strategy is that if there is a major correction due to China’s over stretched stock market and US economic bad weather then this strategy will work as cushion as the back of free fall of market. Domestic reasons will not be strong enough to make nifty below 4750.Only strong bad news of Asian economies and US will drag nifty below 4750.

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