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Time for strategic investors to get back to the Street

B G Shirsat  |  Mumbai 

As expected, the Nifty August futures recovered sharply from the day’s low of 4,951 to close at 5,096 on short covering at the lower level. We had indicated that price based sell-off in the August futures will be around 4,951 if global remained weak. It is difficult to predict the price range for the market because of significant selling pressure in the 5,000-5,300-strike price call options. The options participants were ready for fresh sell-off in the near future and minimise the losses, and bought 4,700-4,900-strike/put options.

There are possibilities of a technical bounce back in the near future at around 5,232, but if global remained weak, volume-based selling could take the August futures to around 4,920. The market undercurrent continues to be weak, as the market picture chart suggests fresh weakness in key losers of the day. Infosys Technologies, Reliance Industries, ICICI Bank and TCS achieved our volume based sell-off targets mentioned in this column, and market picture data points out marginal corrections in these stocks, going ahead.

Given the hue and cry in the market post the S&P downgrade, the Nifty holding above 5,000-5050 buy zone was very credible and reflected very high level of confidence in the Indian equity market. The dependence of global economy on the US and a significant dilution in rate hike actions from RBI will now support the market to guide near/short term range play within 5000-5500, says Moses Harding, head global group, IndusInd Bank. It is also possible that global investors’ attention will shift towards India if inflation could be tamed soon and get the focus back on growth.

QE3 is also in pipe-line to arrest weakness in the global bourses. Therefore, most factors point to sustainability at current levels and prepare for a relief rally soon. Robust domestic demand was good enough to keep the growth momentum around eight per cent. It is time for strategic investors to get back to the street for value buying.

Nevertheless, decline in prices of crude and other commodities, amid a global rout in stocks will help Indian companies cut costs and boost earnings, said Rakesh Jhunjhunwala in an interview with Bloomberg UTV. “India’s relative earnings multiple is back to its mid-2010 level and its five-year trailing average,” Morgan Stanley analysts led by Ridham Desai on Tuesday said in a report, titled ‘The World Makes India Look Good’.

First Published: Wed, August 10 2011. 00:34 IST