Market outlook 30 Aug 2011 ,
based on Pattern Analysis - by Alok Kumar , Director ,
investCraft
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Pattern
As shown above After 2
years of a following ranged movement
1 Year - Aug 2009 to Aug 2010 - Range 4600 - 5300
1 Year - Aug 2010 to Aug 2011 - Range 5200 - 6000
We should must understand
that market in the world moves on at least one year forward
earning estimates. Markets adjust itself now as per the
earning estimates of next year , and that's what happening
now.
In late 2009 , Indian
markets continued its robust growth in earning after 2008
financial crisis , market waited for few more quarters and
remain range bound in a lower range of 4600 on the downside
and 5300-5400 on the upside.
Fundamentals
Companies continued
posting better than expected earnings during that lower
range , resulted into an upward shift of the range from 5200
to 6000. Market waited for another 3-4 quarters in this
higher range , but earning could not justify the
expectations of many global investors and the next year
earning outlook downgraded due to various reason -
- Higher inflation
- Continuous rate hikes by RBI
- Government & policymakers failure to attend economical concerns
- Global recession fears emerging again (Euro zone crisis / US downgrade
etc)
Above factors forced the
market to give up the higher range as fundamentals not
justifying the forward earning estimates and that's the
reason we are seeing the downgrades by research teams.
Technicals
After recovering
from financial crisis (Oct2008 lows) , Nifty created a
bullish "inverted Head & Shoulder" formation with triple
bottom at the lows. The neckline of the bullish formation is
near 4600 , which is the lower band of the range.
In rapidly changing scenario, with increased volatility, we
don't pin-point any violation or break-out levels based only
on technicals.
(since this report
meant to be distributed among retail investors , maintaining
the lay-man language , we are not going deep into
technicals)
Conclusions (As per Our
Pattern Analysis)
Nifty is expected to
move in the lower range again for next quarter or two
waiting see the performance based on recently downgraded
earnings. the range is 4600 on the lower side and 5300/5400
on the higher side.
(We repeat , in higher
volatility you should keep 2% to 5% margin on both sides)
- Alok Kumar ,
www.investcraft.in
(I welcome all feedbacks & suggestions on
alok@iicmindia.net ) |
