My thoughts for Nifty in June and beyond ..

Well, looks like everybody has come up with some or the other predictions. I thought why shouldn't I do it. So here's my chart for June and beyond

And my reasons for this bearish predictions are:

1. Stocks had the best of their time from March2009 till April 2010 - lowest commodity prices in last decade, lowest interest rates in last decade and renewed risk appetite after the crash of Sep 2008 till March 2009

2. Now we have built the same kind of expectations into the prices projecting forward which may not be true. Stocks are not cheap by any measure. One's got to be insane to think PE ratio of 19-20 is associated with "undervalued"

3. US/European markets are showing signs of reversal. Remember the reason we went into a crash because of Credit problems during Lehman Failure. And now you don't want me to name them - Dubai, Greece, Spain, Portugal, .. and why forget the losses US Banks are hiding in their "off balance" sheet stuff. The moment "risk aversion" starts - even the same FIIs coming on TV and saying "India is a domestic Story" kind of crap - start hitting the SELL button and sending the markets into tailspin

4. Mutual Funds have had net redemptions right from September of last year - well I haven't checked April/May. Market makers need some suckers to buy right? Who are they going to sell the stocks to?

5. Rally is running on tired legs - I mean look at the way it acted as soon as it hit 5380 - boom everybody and their grandmother started selling. No sucker left to buy means we are going down baby!

Enough for today - will review and change my views only if 5200-5250 is crossed with decisive volumes. Until then my target for reversal will be around 5090-5140, well at the most 5170-5180

Enjoy!

Girish

PS: Some more rant on how stock markets are leading indicators ..

I know that tomorrow very good GDP will be announced but Stocks have a tendency to "look forward 8 to 9 months". When this rally started in March 2009 - we had worst of the conditions - US/World staring at a depression, GDP of many countries including India being revised down. So why was the rally started in March 2009? Markets saw that in a year - because of massive Stimulus & Near zero interest rates - this game of "extend and pretend" might continue for another year. Markets have got what they were looking for in March 2009.

So if they are truly looking "forward" there are more issues to be resolved. Nothing has improved on the ground in US compared to March 2009. In fact its gotten worse - mortgage defaults have gone up, Unemployment is sky high and FED has exhausted stimulus money. New problems in Eurozone have cropped up. In this environment "risk aversion" might become the theme going forward. Also RBI will have to raise interest rates multiple times to contain Inflation.

So my bet is that this part of rally will peter out soon and we will be heading to lower levels.

Will end with just one point to ponder - Has anyone calculated how far (in % terms) are we from post election rally point? One would be amazed that Index has not moved much at all in 1 full year. Howz that for a bull market?