Sensex Technical View :
Sensex has made a low around 11500 which is close to the support zone on the lower side of the channel. The channel is roughly around 11200-11500 as shown in the chart few days back. Technically the indices are in oversold zones , channel support and ideally should give a bounce back in near term. Also as seen previously markets have given sharp bounce backs after 27-29 % erosion in prices and we are almost getting into that area. Shorting should be avoided near to 11200 roundabouts and one can look to buy 3800/3900 calls as pure risk on dips to those levels .
Market Observations and Thoughts :
Its very difficult to stay composed in such conditions for a trader or investor but the only way to invest in these markets is to go staggered /slow in small lots and continue to maintain decent cash levels too even when things look so cheap, undervalued and tempting levels. Although technically the best way to buy is only on a turnaround and which may take a lot of time to come and value investing is a different story altogether and much more difficult too in current conditions.
As a matter of discipline investors should not commit more then 50-60 % even at 11200-11500 so that risk is lesser and decent cash levels could be utilized in panis or in a comfortable environment. Buying should be done 10-15% of intended qty at one price and then buy on further 10% falls in particular stocks.
Randomn Thoughts :
RBI,SEBI,FED,SEC all the policy makers are suddenly coming out with statements about liquidity concerns and measures. In the real terms its more of a reactionary measure then a precautionary one which doesnot help much.
Although the measures would have led to 5 % jump in seconds in better times are now suddenly seeing the news being sold into. Well coz majority of the measures are not to boost the money markets but to stop them from causing more damage.
I would expect CRR cuts followed by a repo rate cut soon . Fed may start cutting rate with an adhoc one possibly but it may be too late. Financial markets are under-pressure not because companies are going bust but the money and liquidity is not present so things may take much time to settle and consolidate. Suddenly inflation,crude, commodity,food is out of the picture ! as now its more of a financial mess!! and less of macro-economics. The month of October would be very crucial as lot of economic policy decisions may be taken !!.
Dow Jones :
Although the index made an interesting pullback from 9500 levels and giving a decent close but has not complemented the move in the next session. Technically 9500-9800 levels are important for the index as below which the supports and retracements are quite deeper. Also the index is highly volatile so one needs to see a confirmed closing before one can look for more indications.
Stocks to watchout for :
Axis Bank : The stock has been range bound between 650 -725 a break below 650 on closing basis could lead to a quick fall to 600.
Stocks which are highly oversold and can be accumulated on further 5 % dips for a bounce back. Only quick traders can make use of it though
Aban Lloyd .
NIIT ............. ( seems highly oversold and some qty can be taken with a medium term view )
Sterlite Inds ..