sortiwa
[ad_1]
It is a pretty sorry state of affairs right now. The foundation of this fall was laid six months back. It is a very synchronised decline that is happening across the globe and this is not a short term correction but more of a short term downtrend that is unlikely to end in a hurry. Given the factors that we are dealing with right now, not many market participants know how to position themselves and the chart themselves have been quite weak for the last couple of months. The manner in which we have come off, the kind of momentum that we are seeing on the way down with India VIX coming back to levels of 23 and too many stocks helping the Nifty go lower, we feel that 11,100 is a level where the market could actually find some support. The problem is the Bank Nifty has only now started its down trend after outperforming for the last four to five days. So, we are working with a number of about 28,500 and eventually 27,700. Clearly, there is a lot more pain in this market. It is not going to rebound and go back to visiting lifetime highs which is something that people have become used to in the last three years.
This will require a lot more price damage and time damage and while there could be recovery from time to time, the themes that we recommend our subscribers at this point are healthcare, IT, chemicals and insurance. Barring these four themes, just about everything else in the market is quite weak.
Charts are telling you that the long-term structure of the market looks difficult and shaky, especially on the global front. How do Indian broader markets look to you?
Well the broader market is the puzzle that I am still trying to solve because the midcap index saw an excellent move from about 15,000 to 18,500 levels. We ourselves are working with that 18,500 level on the midcap index because it was the high of 2019. It is exactly the level from where the midcap index has started to reverse in the last couple of weeks. This recovery is for real. The top midcap stocks, if you look at the top 50 or the top 100, have actually outperformed the mainline indices and the front line stocks in the last many weeks, whereas, the usual underperformers have just got weaker and weaker. This trend will continue. In this market one should be looking at relative strength. The midcap recovery is here to stay from a longer-term perspective. Right now, the Street might look terrible but the broader market is clearly an opportunity for 2020. This is a year where you will have to be stock specific because in the last couple of years it was all about index investing. In 2020 and even 2021, it will be very stock specific. The themes that I highlighted earlier are where we see the greatest opportunities. We are underweight large caps, overweight midcaps and that is a theme that should carry on for the rest of this year.
How are you analysing Dow, because Dow has started to crack meaningfully after a nine year rally?
It is quite scary. I have been in the camp which believed that what happened in the last six months was not so healthy because every time the Dow made a new high it did not have any support of the technical studies; we are not talking about the daily or the weekly charts, we are talking about the monthly charts. This was the problem for India as well because for the first time in a couple of years, the monthly charts had turned negative and that is probably the reason why after Nifty hit 12,100, we came with a 1,000-point fall target.
For Dow itself, the interim support is about 25,500. It may find some support out there in the next few trading sessions. But broadly if you look at it in the context of the rise it has seen in the last decade and what has happened in the last seven days, it is just too small and therefore there is a lot more room for Dow to fall. It may test levels of 22,000 to 22,500 and that is a reason I believe that this downtrend is not going to end in a hurry. One should stay protected in some of the precious metals like gold and silver. They look excellent on the chart and you need to be in some of the other markets in the world which are insulated to what is happening right now.
What is your view on pharma because that has gone through a six year weak phase and even now things are not changing a whole lot? Where do you see it go?
Unfortunately, the NSE Pharma index is not a good indicator of what pharmaceuticals or the healthcare stocks have been doing. This is because Sun Pharma is a very large contributor to the NSE pharma index. On the other hand, the BSE healthcare index is much better placed. Even in a market like today, you have a Dr Reddy’s which is positive while so many other pharma stocks are down significantly. So, stay with the winners. That is the theme that we have been highlighting to our subscribers. You have to be in stocks that are exhibiting relative strength. So, Dr Reddy’s, Biocon are stocks that we like over the medium term.
How long can this correction last in your view? How to negotiate these trades that you are talking about?
Well usually whenever the downtrend starts, the first legs leads to a lot of price damage and then then there is a lot of time correction. We are entering that phase wherein the price correction could possibly end. After that probably the market would just consolidate in the 11,000-11,600 kind of a band. If that happens, you will see market participants coming back into the market. But do not expect this market to go back to 12,000 and beyond at least for many many months to come. The year 2020 is going to be a challenging year overall.
[ad_2]
Source link
