Nifty, Gold, Silver to remain up in short term

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NIFTY

Nifty has continued to show the strength. Every time, it has been pounded on the bad news, has come up nicely in following days and sometimes in following hours. It indicates that underlying strength is very strong. Now, obviously the question arises that What is pushing India market up? And will it sustain for Long?

Yes, recent reforms have positive effect on the market and after GAAR was deferred, FDI in retail passed and with aggressive and pro reform-market friendly Finance Minister Mr. Chidambaram in Chair—sentiment has turned quite bullish and that is what pushing market up.

Will it sustain? – well, it depends on implementation of promises. Structurally, Global scenario has still not improved. US and Europe equity markets are trading at very premium valuations even on historical comparisons. The very problem, which led to global crisis – excessive leveraged banks, consumer and corporate continue to be leveraged(except small % deleverage registered by consumer and corporate) and nothing has been resolved except kicking can down as and when it alerts.

In India, inflation is still not in RBI’s comfort zone, Banks NPA has continued to rise, Banks are wary to lend infrastructure and Real Estate companies(b’caz of higher NPA of the sector), which is at the core of the growth. Banks are not lending to Small and Medium enterprises ( lending growth to this sector fell to 1.5% from 14.5% YoY). India continues to register high fiscal and current account deficit which keeps rupee under pressure and thus fuels inflation as India depends on imports for her energy requirements.

More to that, structurally, we have not seen rallies sustaining in India if Reverse Repo continues to remain above 7%. Any meaningful and sustained rally has taken place only after Reverse repo declined below 5% and remained there for longer period thus enabling industries and enterprises reduce capital cost and for buyers buying cost.

But, in short run, I believe markets may trade with upward bias taking cues from various actions initiated by Govt and cautious but calmed global economies. I continue to expect Nifty to go up to 6100-6200.

Fundamentally Sound and Technically positive stocks: Sintex, Crompton greaves, Educomp, Force Motors, NMDC, TCI ( Transport Corporation of India ), Tecpro systems. I will keep revisiting this list.

Sesa Goa achieved target of 182-190 and trading now at 197. Investors can hold on it for longer term target of 260.

USDINR

On the back of RBI’s unchanged CRR and Repo move, Rupee can go back to 55.50 and even 56-56.50. But, the way Govt is taking action to increase foreign fund flow and decrease imports to stabilise rupee, any upside in rupee is an opportunity to short it for the target of 48-49.

Major contributors to current account deficits are Oil and Gold. Govt declared yesterday their intention to float Gold bond and gold papers, which will reduce demand of physical gold and thus will reduce imports and stabilise rupee.

What I mean to say is—Govt has waged all out war on rupee to bring it down below 50 to spur the growth in economy. And, I believe- plans outlaid by FM can result in lower twin deficits this time.

GOLD

Gold has spent last 2 weeks in the narrow range of $1680-1725. Dollar continued to weaken last week and now expected to touch 78.50 full 100 basis points down from current level. On daily charts, Gold looks ready for 1-3 days spurt. Gold can scale up to $1752 and may try to test $ 1770-$1780. But, look at below chart.

Upper channel resistance lies around $1760-1770. I will keenly watch Gold’s strength at resistance. I will initiate long term buy only if Gold sustains above it and closes above it.

SILVER

Silver will continue to follow Gold.

CRUDE

I will remain sideways. Will update as opportunity arises.

Note:

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Regards

Dhaval Shah

Blog: https://investmentacademy.wordpress.com/

Disclaimer: Daily Wealth is a free daily investment newsletter published by Investment Academy. This publication does not provide individual, customized investment or trading advice. All information is based upon data whose accuracy is deemed reliable, but not guaranteed. Performance returns cited are derived from our best estimates, but hypothetical as we do not track actual prices of customer purchases and sales. Author might have open positions in the stocks and Indices recommended above.

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