Shomesh Kumar, Market Analyst
Right now, there are two factors either dampening the sentiments or inducing extreme volatility in the system, “The Corona virus & The impending budget”.
This volatility will be further aided by the upcoming January expiry of F&O contracts and the budget, to be presented on the coming Saturday i.e. on 1st February 2020. Stock markets will trade this Saturday as well.
Some of the quick observations are enumerated as below.
• The buying is becoming relatively broad based. Now there are not only 10 odd stocks pushing the markets up.
• Good quality mid and small cap stocks have started to participate in the rally. The long-term outlook for this segment is mainly dependent upon the return of GDP growth which will largely be understood around April to June 2020.
• There is a lot of expectations from the budget and it is a risk to the continuing momentum of the stock markets in case the expectations are belied.
• The pre-budget rally has not happened yet which could restrict the downside in case of sharp fall.
• I had written almost a year back that Pharma stocks are getting ready for the long-term bull run with a caveat that maybe a year of consolidation is still left. Now you can see that the Pharma stocks have begun to make a come back.
• I had also written about the bottoming signs of Auto stocks 3-4 months back and I hold the same view; however, there could be a painful consolidation for a year or so before the trend fully reverses to positive. The one thing that I can confirm from the available data that the stocks in this sector have bottomed out.
• The long-term investors should begin to accumulate stocks in Auto and Pharma but look for undervalued stocks (value buy) as the growth stocks may not be the right pick in these sectors as of now.
Investment Strategy
The is no change in my investment strategy and I continue to buy at dips (BAD). If you are a serious long-term investor and looking for Wealth Creation then I dare write that next decade will be for the growth of India (could be even for the globe) and therefore, for the growth of capital markets. If Indian economy doubles by next decade then no one should have doubt that stock market investments should gain 3 times (provided you have chosen the right set of stocks with the help of adviser)
You would have already memorized by now my target for Nifty & Sensex 30,000 and 1,00,000 respectively by 2028.
Here is my new slogan.
Trade for Fun & Invest for Wealth Creation
Trading Strategy
I had written that you can begin buying closer to 12,000 and you can see yourself that is working. However; now the pattern has changed. Nifty should be trading in the range of 12,000-12,300 before it gives fresh direction. Remember, budget is going to cause extreme volatility. The worry that I have this time is that in case 12,000 is broken then Nifty might have to visit 11,500. So, your trading bets have to be placed accordingly. To summarize;
• Trade in the range of 12,000-12,300
• Go Long above 12,300
• Go Short below 12,000 for targets 11,750 & 11,500
• Begin to buy again around 11,500 with a final stop loss placed at around 11,300
• 11,500 on Nifty should be treated as crucial for short term trend reversal to South.
(Share Manthan, January 29th, 2020)