Sensex Technical View :
Sensex bounce backs should face resistance at 15500-16100 . Supports on the lower side are placed at 14700, 14100. Traders can continue to stay on sidelines as volatility would hit on both sides .
Investors who had taken the important decision of Generating Cash/ Exitting at 17500/16800/16100 can now look to gradually buy at 15300 -14700 zone in particular stocks partially and keep provisions to add more if we see 14100 zone or below.Bounce back would face resistance at 15500-16100 zone.
Stocks to watchout for :
IDFC jumps to 129 from 116-118 , Bombay Dyeing up 10 % , BOB and ONGC may get it near to reco prices soon .
Many stocks look attractive and investors can do their own research as in a bottom bounce its very difficult to pick stocks which may bounce the quickest !! ........small caps from K S oils to large caps like RcAP all loook interesting . The favourites being sent to clients .
Some thoughts :
In the last few days we have seen indices knock of from 17500 + levels to a new low very close to 14700.
During the 1st week of may , all the people were gung ho about 5500-5600 on nifty and 18500 on Sensex when it was at 17500. So the consensus amongst analysts,market players was to build longs . Well as part of our discipline and we were extremely cautious and i made it a point to use clear words to make the point of generating cash and booking profits fully.
Certain sentences and the dates :
May 04 ( Sensex at 17600 ) - Investors look to book profits around the higher zone and also look to trim their portfolio and reduce the junk and small compositions.
May 05 ( sensex does high of 17700 ) - Pulling out profits and generating a good cash level is necessary for investors with discipline, so simply put generate cash at 17500 + .
May 11 ( Sensex near 16500 ) --- Short term reversal would need to be quick and above 17500 otherwise can also be treated as a bull trap. Similarly a breakdown below 16300-16500 should have good momentum !!! So wait and watch around crucial levels.
So all throughout this period when markets were sustaining at higher levels our disciplined approach kept people from taking fresh positions and reducing portfolio size to a great extent with lot of cash. Apart from generating cash the thing which might have created problems would be getting into leverage longs which got trapped !! ...
Now when markets are near to lows the general consensus among people is of much lower prices and going short at current levels which could lead to some selling pressure and slower decline . Technically this can also develop into bear trap just opposite to the previous 17500 pullback before the fall.. Such a formation will take time but at current levels lot of stocks look cheap on fundamentals and oversold technically.
As technically its difficult to catch a bottom or find a place where it could stop and above all index lows and stocks lows would not coincide so investors need to go staggered. Also difficult to say which stocks would bounce back sharply as its no more a breakout scenario where in i would be able to pick the best ones. So out here one would need to go staggered in good quality stocks and then be patient .... With time the consensus would change but that would only be at higher levels before trapping again.......... So investors who have followed the view of generating cash at 17k + can continue to go staggered in buying large caps and solid mid caps ....
Just a few speculative thoughts in the end but in markets its seen valuations do catch up with time and patient investors only buy into dips and panics and not at 21k . So bottomline is the current time is for investors who would not be shaken by the screen for next 2-6 mths and expect returns only after that and they may get surprise returns in couple of months also u never know.
Would not speak much on the repo rate as i dont understand economics so let markets decide the impact but yes its a good step looking forward .
Best Regards,
Nooresh
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