Most stake-holders are worried on NIFTY struggle for build-up of bullish momentum while on its recovery path from 7723 (into 8000 as I write this blog), despite combination of positive domestic and global cues. The external trigger (and supportive tailwinds) was on value-buy from global investors driving the DJI from 15850 to 16600 and dilution in risk-off stance unwinding the US 10Y bond yield from 1.90% into 2.25%. The domestic triggers are many from NaMo gaining political advantage, slew of policy reforms and step-up momentum in policy implementation and execution. While all these cues are well taken, positive take-away is from shift of focus from 7540 to 8180 which is big relief, post the nervous signals of NIFTY extending the reversal from 8150-8180 into 7540-7685.
What next? If no bolt from the blue, NIFTY has already established firm strategic (and long term) base at 7723 (up from 7540) and would need manna from the heaven to post a new all-time high over 8180. Both these events are not ruled out from weak external sector and optimism on the domestic sector. The lead-lag play of these events (risk from external and reward from internal) is causing the worry at this stage! The bias however is for upside break of this 7723-8180 focus zone as global investors continue to prefer to stay overweight on India on hope of monetary easing ahead of expectation and inevitable sovereign rating upgrade in 2015.
The attention at this stage is on the momentum of positive shift on India macroeconomic fundamentals; growth into higher end of 5.5-7.5%; CPI sustainability at lower end of 6-8% and steady WPI at 2-4%. The structural woes on twin-deficits continue to exist but not seen as major hurdle to dilute the pent-up bullish momentum, as the worst is seen to be behind and light at the end of the tunnel is sighted.
All taken, strategic focus on NIFTY is reviewed to earlier trading/investment range of 7700/7850-8150/8300 and stay on buy mode on corrective dips to be invested to ride the bullish trend.
Wish you all a very Happy Diwali and profitable year ahead!
Moses Harding
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