Nifty in Correction Mood....

For the last one week Nifty has been roughly in the range of 100 points from 5320 to 5420. Fridays move suggests that this range will be broken on the downside and the much awaited correction of last whole month will begin. Momentum indicators like MACD and RSI are also pointing to a fall and the break of the channel shown below. On the weekly charts also there is a doji formed which signals that the breaks on the upside momnetum are pressed for now. On the other hand Dow Jones at 12880 will need extra power to cross this impediment and start fresh rally. Besides that the Rupee appreciation has also halted. Tonight Greece parliament should pass the austerity bill and world markets tomorrow will not react to it very positively. My first target for Nifty is 5200-5215 only once 5325 is breached..

The best short to me appears is Larsen and Tubro which is quoting at 1350. With a SL of 1370 one can short for a target of 1300 and 1280.

On the other hand I feel IT stocks have given a clean breakout. Polaris, Wipro and HCL Tech are examples of the same. TCS is set to make new lifetime highs and one can look to add it in weakness.

Markets precariously poised

Nifty has relentlessly marched upwards in this entire month. It has retraced more than 100% from its Decemeber high which is alarmingly dangerous to bears like me. Most of the Nifty 50 charts and other Midcap charts looks very bullish. Many charts; to name a few - LT, TataSteel, SBI and ICICIBank have moved passed their 100 Day EMA and have formed nice cups.One can see good volumes and buying in many scrips which is slowly pushing me to become a bull from a hard core bear Though there are no signs of weakenss on Nifty except for it is overbought, a pullback looks eminent.. I .The main thing to watchout will be whether this pullback is healthy retracement forming handle to the cup or next leg down. It appears to me that a bottom is in place for now and 4400 is a rare probablity. However todays volume has been quite highwhich tells me that this recent upmove is about to get over and so no new longs should be created at this juncture.

Stock Recommendations on the basis of Technicals

Hello Friends.

Posting here after a long time. Actually was busy studying markets from Technicals Perspective.

Here are few of my recommendations.

1)Geodesic

CMP = 111
TGT = 127
SL = 105

2) Alok Industries

CMP = 27.90
TGT = 36
SL = 25

3) Bank of Baroda

CMP = 937
TGT = 1000
SL = 905

Accumulate the above stocks on dips to get better Return Ratio.

Yet again the RBI raises Interest Rates to tame the shooting inflation

The Reserve Bank of India springs back to action to tackle the mounting inflation much before the upcoming credit policy on 27th of July 2010

The RBI raises the Repo Rate (the rate at which banks borrow money from RBI for an overnight period) from 5.25 to 5.5

It has also increased the Reverse Repo rate (the rate at which RBI sucks excess liquidity from the markets) from 3.75 to 4.

The RBI seems to have gone for the rate hike for the following reasons

1) Strong IIP numbers over couple of months especially in the capital goods sector.

2) Phenomenal growth in credit offtake for banks that has risen from 10% ( October 2009) to 20% (May 2010)

3) Unabated rise in inflation numbers.

The above move comes as a part of governments plan to move out of the expansionary policy in a calibrated manner.

At this juncture it would have not been prudent to raise Cash Reserve Ratio ie CRR as currently there is a liquidity crunch in the system. The banks are nearly short of 50,000 crs of funds as a lot of money on account of advance tax payments, 3G and BWA auctions had moved from the banks into coffers of the Government. However soon this will reverse as Government pays salaries and makes other payments.

Moreover today itself the Government did a bond auction worth Rs 10,000 crs and one more bond auction worth Rs 35,000 crs is scheduled for July 28.

Thus the liquidity in the system would soon become comfortable and our EMIs may not suddenly inch up at-least not before the upcoming credit policy.