Sunday, February 22, 2009

INDIAN MARKETS Feb 2009 : Disaster Looming Large

Are you being led to believe in the stories of recovery of Indian Industry? Of expected turn around tales in the fortune of Indian companies from here on? If you are an investor in the Indian Stock Markets then take all these stories with a pinch of salt. Do not make hasty investment decisions based on such dubious news flows. Do evaluate the reasons given below and then take an informed decision.

Apparent Trend of Nifty
Any one will confirm that Nifty is precariously poised to gravitate lower from the close of 20 Feb 2009. Check out all important Indicators if you may. Every Indicator of any consequence is telling you to stay away from Nifty if you are contemplating buying.

Take a look at MACD. Since it is neither purely a lagging nor purely a leading indicator, it is specially helpful in the present time of non- trending market. In other words MACD will work with a greater degree of accuracy in times of sideways movement of market. And MACD clearly indicates that Nifty is headed southwards.

What about Commodity Channel Index or CCI in short? It confirms what MACD is telling us. Indicators like ROC and Momentum have a similar outlook. RSI is non committal as expected in sideways market movements . It is therefore seen between the band of 30 and 70 since Nov 2008 - time during which Nifty has moved sideways. Only slow stochastic gives us a hint that the Nifty is in Oversold Zone and may spring up.

Chances of Nifty Moving Up
Even though all Indicators are in conformity to Price movement in the Charts, let us analyse the chances of Nifty moving up from the closing price of 20 Feb 2009 which has been indicated as a probability in Slow Stochastic. Nifty is trading in a very narrow Bollinger Band . In this constricted band Nifty is confined between the lower limit of 2660 and upper limit of 2970. The peculiarity of constricted Bollinger Band is that if upper or lower limits of the Band are breached then there is a violent breakout in the same direction. That means for Nifty to move upwards it has to first breach the level of 2970. And for Nifty to move decisively southwards it has to breach the level of 2660. On 20 Feb 2009 Nifty close at 2736. Now you tell me - what is more probable? Obviously it will be much easier for Nifty to breach 2660 than breach 2970 from the closing of 2736. With this bit of knowledge, you can make your own decisions for the chances of Nifty moving up from here!!

What Sectors Say
Analysis of different Sectors reveal that they are in dire straits to say the least. Every Sector is telling the investor to run for cover. But the irony is - now there is very little cover left to even hide. The adorable Sectors are going to be worst hit. IT Sector gave indications of accelerated fall on 17 Feb 2009 itself. Banking Sector gave clear and confirmed signals of massive fall ahead on 20 Feb 2009. Auto and Metals are dangerously dangling as if on a slender thread. Infrastructure and Realty are also poised to slide. Capital Goods Sector is feeling the heat. Pharma is in no better situation. Fertilizer Sector and Textile Sector are tottering at the brink of disaster. There is no respite even for Media and Telecom Sectors.

Power Sector and Cement Sector are slightly better off - in a more comfortable position than the Sectors discussed so far. Even Sugar Sector can claim some degree of respectability . FMCG Sector and Oil Sector are presently enjoying the most stable position.


Wrap Up
No wonder Nifty is exhibiting such weakness!! Majority of our Sectors are buckling under tremendous pressure and are on the verge of collapsing into a heap. What with no real help forthcoming from the Budget, it is no surprise that Nifty is headed towards the level of 1750. This I had already predicted in my earlier post of Jan 2009 titled " Stock Market Bottom- Revelations". That prediction was mostly based on Elliot Wave and Fibonacci calculations which is now being corroborated by Price movement, all Indicators, Bollinger Band and the Sector analysis. Now it is up to the investors to decide whether they still have the heart to buy the story of Recovery of India Inc.