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Countering the BIG BEAR HUG

What with the bench mark Nifty sliding to sub 8K level mark which happens to be the lowest since the commencing of this calendar year, the investors are in the grip of dilemma now as the Bear is doing sortie of the sorts and the big question amongst the mind of the investor’s remains is the duration of the bear hug.

As for now the nifty has shown the decisive tanking down to the sub 8000 levels which also happens to be the neckline of the head n shoulder in the daily charts goes on to reflect the short term down trends. Although the oscillator technically speaking after signaling the sell sign also continues to trade with the negative bias, moreover the short term oscillator is on the oversold trading zone due to which  technically speaking a bounce back cannot be ruled out which must be obviously be used as an opportunity of the selling opportunity only.

It would be advisable to short nifty futures during the bounce till 8035/8055; the nifty could head towards the 7750 or could be 7500 levels as an aggressive target. The culprits on the way are Fed meet, poor monsoon, and underperforming metals, banks and the PSUs. Of late the market is recovering in couple of trading sessions but the follow up buying seems to be totally missing and on the contrary the market is making lower highs and bigger lows indicating the thick bear footmark impressions around. Quick retracing of the pre March levels appears to be farfetched idea as of yet.

The Indian markets are headed for a flat end as it seems to have lost the fizz on the way and run out of steam and at the moment the stock valuations are neither attractive nor overvalued. At the moment the Indian stock markets are remarkably resilient due to the disappointing quarterly earnings, and so also the foreign selling has been at its minimum. The Indian markets have of late have underperformed but still India remains to be a stellar promising market of the decade without doubt. So far there is neither dramatic selling by the foreign investors as they own good quality stocks nor big inflows nor buying in India at the moment. The foreign inflows will pour in like an avalanche once again the moment they smell the cyclical upturn happening as India is the best positioned amongst the peer emerging markets. And as such the Indian bond markets appears to be looking as most attractive.

After a correction of almost 12% the markets appear to be okay valuation wise they may not look super attractive but they are not looking to be expensive either and in couple of years the market is headed for an investment upswing. With the crude prices to slide further, and the 2 and 4 wheeler sales picking up the infrastructure companies are trailing close to the heels. To set up a winning portfolio it is imperative to add HDFC, L&T and Maruti trio in the basket.

As an investor you need to gauge the change and pattern of the latest development and stipulated expected or unexpected further developments and what is suggestible is the capital goods as well as the IT stocks especially when the nifty hovers in around 7700 levels. What the markets at the are on the verge of a breakout and the 60%  of the nifty stocks which are trading at the sub 200-DMA (daily moving averages ) which is the repeat of February 2014 are the highest in India as such it is likely to gap down and the follow up selling is likely to get going, and at sub 8000 levels it is probably a bit too late for the investor’s to go short on the nifty at the moment as the slide down is limited hence the investors should make use of these dips to get going long on the stocks in certain sectors such as the capital goods, banking, IT and the metals. Display of patience and strategy of wait and watch is the call for the day.