Nov 10, 2012

Market Update 10/11/2012

The Nifty closed 0.20% down from the previous week. Global markets were also negative for the week as news of Obama's re-election have not been received well by the markets.

5580 is an important support for the Nifty. It is also the 50 DMA. The markets could test this support in the week ahead. Momentum indicators suggest a period of consolidation.

Obama's re-election means the likelihood of QE3 is high. Gold should go up as investors look to hedge inflation. The dollar should weaken and that should reduce the current account deficit. Expect some of the money to find its way in to the Indian market.

The winter session of parliament will test the resolve of the Govt to implement reforms. If reforms are passed through then we could see a small bull rally.

Gold closed the week at 3164 per gram. Prices could go up domestically on account of Diwali.

The dollar continued to gain on the Rupee. It closed the week at 54.64. There is strong resistance at 54.8.

Asset stance:

1. Mutual Fund SIP. Markets are expected to be range bound over the long term and this is a good time to accumulate units through averaging.   
2. Play the range game. Markets seem to have a broad support around 5250, and a resistance at around 5850. Only for pros.
3. Fundamentals to pick value stocks. Only for pros.
4. Go for investments in balanced funds- Auto asset re-allocation will book profits for you and you will also get excellent rates in debt.

1. Short term yield rates are expected to moderate around 8-8.5%.
2. RBI expected to reduce rates in December policy review (market sources). Advice duration play in long term income funds.

1. I'd short the dollar. US economy still recovering and likelihood of QE3. But this is a long play (as in 3-6 months). Reforms will be pushed through in parliament means Rupee will go up.

1. I'd go long on gold. It's not gone anywhere this year. But, it looks like this is a period of consolidation before it takes off again. With QE3 there is more likelihood of gold going up.