This is an interesting exercise i have decided to do every month. Earlier had used this only post a good correction or rise.
There are three sheets – Normal, Optimistic and Pessimistic. Change the expected prices in the top 10/20 stocks and you can get a good idea for Nifty. I find it tough to see an extreme move.
The big problem today is there is no leadership in the Index for a major move on either side.
Look at these 6 top weights which have been just around the same price for a long time. Elephants of Nifty !
ITC / Reliance Inds/ Infosys/ TCS and HDFC/ HDFC Bank – Now this is almost 39% of the Nifty weightage.
So how will we get a meaningful trending move in the Nifty if these elephants dont move. I see a lot of discussion whatsapp groups saying PSU Banks and Metals will lead. The funny part is these two sectors are now only 4-5% of the Index so even if all of them double the impact would be 5-7% with some floating mkt cap calculation help.
I believe it would be tough for the Nifty do a big move unless we see some meaningful trends in the top 10 elephants. We will be closely watching them for technical trend changes rather then making wild guesses like Nifty 7000 is coming or 10000 is coming in 2016 or give a big lecture on how earnings are depressed , China is a crisis in making or FED will do this and that!!
This is a recent post where i have discussed how range bound the top 15 Nifty stocks are !! How long will they stay is tough to say but believe post a few months we will see some clear indications till then be stock specific/selective and cautious given the solid outperformance of smallcaps/microcaps.
Look at the previous posts on Nifty Calculator and how it helped us.
-> The first time i put this up was in December 2011 ( It bottomed in next few weeks). It helped us be bullish instead of the market sentiments and were buyers from 4800-4550. Check the post – What is Nifty and What is your Target for Nifty
-> We did this exercise again when we came out with a very bullish view in August 2012 in a report titled –Analyse India – Forget the Past.
This time it helped us to come out with an optimistic targets.
Check the Post – Nifty 50 Index – Weightages and Free Float Market-Cap
-> The time it was discussed in August/September 2013. Although my pessimistic guess worked precisely but we could not pick that bottom though.
Check the post – Where is Nifty going ? Do it yourself – Market kya Lagta hai also another post on how it was necessary to invest slowly with long term view in the drop to 5100