Thursday, October 9, 2008

Relief Rally Ahead !

A sharply oversold market is now ready for a bounce. For India, Infosys results due on Friday morning may set the undertone for the next few days. The market is ready to go up on the slightest piece of good news. If Infosys guidance is pessimistic, we may react on the downside. But, the smallest hint of "we are going to do well" should see a decent rally in the stock market. The Nifty should open higher, and a rally to 3750 or 3800 seems easy and likely (assuming Infosys does not disappoint).
On the downside, I expect support to come in at 3500 (almost the point at which the Nifty closed on Wednesday).

Sectors for short term trading
If Infosys does not disappoint, then large cap stocks in the IT sector should be considered for swing trades. There is a buy on dips opportunity. All trades are short term.
PSU's like NTPC, National Alum, ONGC, BHEL & State Bank come in the list of potential swing trades. I do not consider momentum stocks for trading in the current environment since they represent high risk.
HDFC Bank, CIPLA, HDFC, Zee, Grasim in the private sector represents opportunity.

Insurance for Bank Deposits

I have a blog entry on insurance available on bank deposits. Read it here.

1 comment:

piyush modi said...

Definately seems so. US mkts have sold off 16-17% in just 5-6 trading sessions. Thats more like a EM market move. Anyways, its the largest & longest losing streak for Dow since crash of 1987 (when it cracked 25% in a single day !!!).

But surprisingly even today it hasnt bounced up as of yet. Does it suggest that it could turn into a end-of-world panic, where stocks could fall another 10-15% ?? Now nothing seems incredible anymore, seeing currencies, commodities, equities move in past one month. Anyways, the last couple of things remain, which too could come through in US- suspension of mark to market accounting norms, govt guarantee of transactions in inter bank market & state picking up stakes in bank & recapitalising them.

But is a more durable rally(like in april/end july-aug) possible? Whenever in the past two years we've seen the VIX spike up like it has it has led to an intermediate bottom. This time VIX has touched all time highs & sentiment is extremely bearish. Indian mkts too have seen mid-caps stocks fall 50% in one month after having corrected 60-80% already. Nifty on wednesday bounced off the trendline connecting lows since march, & also the closing low of jan.

Even further is durable rally spread over 2-3 months possible? Right now it seems impossible, but bear mkt rallies have been known to last 2-3 months. Lets see.