NIFTY 05 OCT 09,MONDAY

Most of the fund Managers and HNIs’ have started getting very cautious. The exposures are being trimmed and they are not willing to take any fresh positions. While there is no denying that even at the current valuations, there may still be some stock-specific value left, but almost across the board, the valuations are rich in front liners.

With the FIIs continuing to pour in money to the tune of US$ 200-250 million every day, there is also an excited and animated discussion as to whether the market can touch the previous ever high and also create newer highs! With increasing inflows, the FIIs being the mean money machines take into account the fact that if the Indian currency were to appreciate to Rs. 40 to a dollar from the present 48+, even if that were to take between 12-24 months, it would mean a straight 20% gain on the currency alone!

Also, the Mean P/E over the last 10 years has been 17.7 and the standard deviation there on 3.65. So if we were to add the Standard Deviation to the Mean it would sum up to a P/E of 21.35. We are currently trading at a P/E of 22.9. It’s time to get cautious and extremely cautious too. Just keep a very keen eye on the markets and don’t let both, opportunities and profits slip out of your trades.

The good thing is that the Nifty is trading above its 20 Day Moving Average (4880) as well as 40 Day Moving Average 4719 as well as the 20 and 40 Hourly Moving Average. So, on the downside the DMA’s will provide strong support.

But mind you, the USA is doing nothing to make the stock markets a better place to trade in. They have done nothing to resolve the sub-prime crisis – a demon they created and breathed life into. The hunter is now becoming the victim. The jobless data is a real disaster- the highest ever in 22 years The deficit financing US$ 1.45 trillion being adopted by USA will keep the mood buoyant and the economy in an illusionary recovery mode, however, the real despair will come when the magical printed dollars suddenly are unable to perform the prestidigitation anymore.

The rupee appreciated in the last quarter vis-à-vis the dollar only because the imports reduced more than the exports. Imports going down are a sign of a slowing economy. Foreign Funds coming in is a sign of India being a relatively better investment option. But, remember when the FII’s pull the rug beneath our feet, history is a witness to what has happened whenever that happened. So trade cautiously. Just banking on good Q2 results is not a very wise thing to do. In a global village, we might be relatively insulated but when the axe does fall, the feet will bleed and the pain will be felt.

NIFTY FOR MONDAY

NIFTY R-PIVOT IS 4950. IT IS STRONG ABOVE THIS AND WEAK BELOW THIS.

BUY @ 4918. TGT 4930-4947-4954-4962-4972-4984 SL 4896
SELL @ 4962 TGT 4954-4947-4927-4918-4908-4896-4882 SL 4984.

REMEMBER, NEVER BUY WHEN THE NIFTY IS STILL FALLING AND NEVER SELL WHEN THE NIFTY IS STILL RISING. ENTER THE TRADE ONLY WHEN THE NIFTY FINISHES ITS RISE OR FALL AND THEN SETTLES AROUND THE ENTRY PRICE.