Sensex Technical View :
Sensex has been the only index globally which has not given a sharp bounce it seems.
Certain technical points which are important:
1) In the last few corrections since January the falls have lasted for almost 48-52 sessions or say roughly 11-13 weeks. 21k -14.7k , 17.7k to 12.5k . Although the current fall has been much larger in magnitude around 50 % this time around to previous 30 % ones.
2) In the previous corrections we have seen a bounce of around 23-25 %. So in that sense we can see a bounce to minimum of 9500-9700. As the fall has been steeper can we see a much sharper pullback beyond 9700 .
3) Fibonacci Retracements for the fall are placed at 9550/10700 /11650 /12500 which correspond to 23.6/38.2/50/61.8 retracements. Ideally a bear rally bounce can target around 38/50 % .
4) There are some gaps left on the upside. 9570-9681 , 11257-11410 , 12284 -12472. So these gaps can get filled in the future but when is a big question as all are placed much higher from current.
So currently as the index is oversold the bounce back could be sharp also which could target 9500-9700 and to an extent 10500-10700 in a more sharper case in the next few weeks. On the lower side 8500-8700 zone could be the support.
Stocks to watchout for :
BOI , SBI , Glenmark remain good safe bets for medium term .
Long term high risk high return investments which can be bought in systematic investment manner.
Reliance Infra , JP associates , HCC , Patel Engineering.
Tata Steel , Hindalco , Sterlite
Chennai Petro , RPL , MRPL
As the above stocks have fallen steeply and may continue to remain sideways or drift lower also in medium term but in 6 mths -1 yr + should start looking up and give returns.
Systematic Investment Methodology :
I think this is where lot of investors dont give enough thought or are haphazard in their methodology.
Some of the mistakes :
1) Allocation of money :
There is no fixed allocation for a particular stock or sector and in many case not on the entire portfolio. So dividing into systematic investment amounts itself has no structure.
2) Amount not Shares
The essence of systematic investments is to get exposure in a good stock or business regularly and a good average price. Many of the investors do have exposures to SIP mutual funds and do know the logic of puttin x amount every month on every date. They also know the amount of time period they are going to do the same.
But suddenly in stock investment the whole thing goes a little different. Investors start counting in terms of no of shares!!! .
Lets take an example if one wants to buy glenmark for long term say 6 mths - 1yr . First thing to decide would be the amount to be allocated and next the period of accumulation and then slowly buy on dips in a fixed amount say 160k . Say 100 at 400 , 133 at 300 , 160 at 250 , 142 at 280 ( lot of say 40k ) .
There are more strategies to work it out ... Will be putting some in the coming week in details.