NIFTY recovery from 7723 hit 8167 in completion of back-and-forth moves within set strategic focus (and trading) range of 7700/7750-8150/8200 with 8160 to 7723 to 8167 in quick time from 23rd September; speed either-way is indeed break-neck!? What next?
NIFTY is significantly re-rated from the high's of 6338-6357 seen in 2008-2010 with lift of long term base at 7723 (worst case not below 7540) and short term base at 7850. What can trigger upside momentum beyond 8180? Foremost is the steady (and sustainable) improvement in India macroeconomic fundamentals that would set up rating upgrade and accelerated off-shore inflows and increased domestic investor appetite. Next is from RBI shift into dovish monetary policy stance in support of growth taking comfort from sustainable ease in inflation. These two events are strong to trigger extended rally in NIFTY beyond 8180 into 8285-8300 and beyond. What are the risk factors? Foremost is from the high valuation at current levels which is not seen cheap to acquire. Next is from recovery in developed economies which could shift investor appetite from India for portfolio churn from high value India Equity to affordable value DM equity assets. The most important risk is from execution failure of the BJP/NDA Government. All taken the risk-reward is balanced between domestic and global cues; best of both will lead to next round of re-rating (over 8500) worst of both will lead to collapse (below 7550) and mix of both will be consolidation at 7850-8350.
At this stage, there is no clarity to set high probability directional bias; but the risk-perception bias is in favour of the investors (and the bulls). All taken, it is good to review strategic focus at 7850/8000-8350/8500 (risk below 7700-7725). The investor strategy will stay in "buy-dips" mode with immediate supports at 8085/7985 and resistance zones at 8285-8300, 8350-8365 and 8400-8415.
The approach on the way forward is the following: (a) take-out the capital and run the balance portfolio with trail stop at 8085 and reinstate investment at 8085-7985; (b) take entire money off the table to advance the Christmas/New Year holidays leaving bids in the market at 8085-7985; (c) retain the portfolio with trail stop below 8085/7985 and be with the chase into 8350-8500.
You are the best judge! Good luck!
Moses Harding
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