Cup and Handle Breakout in Nifty.

In our last post we mentioned about the nifty losing momentum at all time highs but the market has made a comeback above the levels we mentioned to be important and gave a 1% rally from those turning levels already.

Here is our fresh take on the Nifty for the medium term time frame.

We have seen for the past couple of months a rally with healthy corrections starting from Mar 2016 and we have almost seen a return of 25% in a year in the benchmark index NIFTY and the stocks have almost all doubled from the levels that were in March 2016 except a very few stocks.

Though the majority are feeling that the stocks and index had a huge run up and its the time for a correction the market is behaving insane and making new highs every week by spending time consolidating more rather than correcting this is the support that the market is getting from bulls.

The charts are telling the market has just broken out and is ready to start the rally to much higher levels as you can see from the chart below a cup and handle breakout chart in nifty has just occurred and if this materializes into a rally we can get a 15% return in the medium term of 6-8 months.

Though the market valuations does not seem attractive keeping in mind the past rally but the story that is unfolding for India in the current global economic conditions can't be understood in simple terms.By this i mean in relative terms the global investors are showing interest in Indian markets and this is evident from their fund inflows for the past one year and this is expected to continue for the intermediate term which can take the markets at least 15% higher from the current levels.

Here is a Research Report from Motilal Oswal expressing fundamental view on nifty at current juncture

Click Here to View the Report

Though nothing can be predicted with 100% certainty the bullish view expressed here has a high probability.


The idea here is to just ride on the trend move by keeping a stoploss.

Our Idea is to Buy the market on every dips with stop loss placed at 9018 spot levels for the short term (1-2 months ) and 8800-40 levels for the medium term. (6-8 months)

NIfty Loosing Momentum at All Time Highs!

We have witnessed huge buying support on the election results being positive for BJP and concluded that a new Fresh rally might be emerged from the levels 9060-70 in our last post but the past few days have not been good for the markets that can be seen from the reduced momentum that is visible in the markets and also a biggest percentage drop of 1% is seen after two months in the index on this Wednesday.

Though there is huge buying support from FIIs at these levels in the cash segment the index has not witnessed a Significant momentum which otherwise should have been the case.Also they are loading bearish positions in the Stock Futures segment as a Hedge of their portfolios from the past two weeks in a significant amount, This cautions us in believing in further rally from the current levels.However there is also no reason to be hugely bearish on the markets be it fundamental or technical.Only the momentum is reduced here which signals a caution to adopt.

Based on the current market conditions the bullish momentum will be back in the market only if the Nifty manages to close above 9170 spot on a daily closing basis . We believe this level to be the turning level for both bulls and bears.

So the Strategy would Short with SL 9170 Spot as long as LTP below 9170 and Long above 9170 with SL as 9170 Spot.

Nifty made a Turnaround to Start a Fresh Rally!

We have seen cautious approach by the foreign institutional investors just before the State election results which we have noted in our earlier post.But on Stable Win by the Ruling Party BJP in 4 out of 5 States that went for election the results have been a clear mandate which welcomed the FIIs to become more confident of much wanted reforms and belief in growth story and they are now loading up their kittys with stocks to fuel a fresh rally at this juncture when the indexes are hitting All time highs.

This is evident from the Fund flows in the Derivatives and Cash Segment just after the election where they have booked out the loss in bearish positions and Loaded the Bullish positions of a significant portion in Index Futures and Cash segment which gave rise to a bullish Breakout in the Index and stocks.

So It is clear from these actions that they believe in a further Rally in the Indian Markets , So it is clear time to add some stocks to your portfolios to get advantage of the rally that is to come.

The sectors which are to look out for are Pharma in the first place followed by the Energy to make some meaningful gains as the rate sensitives have already been rallying for a long time since Feb 2016.

In the Banking space there are certain opportunities to look for in Beaten down PSU stocks which haven't participated much in the rally that we have seen and in the Private Banking space Axis Bank is a good opportunity at current valuations.

The IT Space is witnessing a weakness even in the wake of the strength in the markets which suggests to put a limited exposure in this space where concerns exist on Trump becoming the President.

Disclaimer: The views shared here are purely for educational Purpose and are not in any manner an advice to BUY or SELL any specific stock or Index Accordingly you are requested to consult an SEBI Registered Financial Advisor before taking any Investment Decisions

Nifty Fund Flow Clues March 2017!

While Nifty is in the range of 8800-9000 since almost a month Traders are keen about which direction it is going to take from current levels While it is important to understand what the market makers have in mind to predict the future movement.

I have made an attempt to explain the action in derivatives for the past 2 weeks while the nifty is preparing for its next break away move.

Here is a snapshot of the FII's action in derivatives for the past 2 weeks.
See the Pic above
Picture Courtesy: Vtrender.com

To brief what has been the activity in Derivatives FIIs are Net SHORT in Index Futures 8.5k Contracts (Net Bearish)

Net shorted Index calls 19k Contracts (Net Bearish)
Net Long in Index Puts 39k Contracts (Net Bearish)

Net Stock Futures shorted 70k Contracts (Net bearish)

While Nifty has been in the same range of 8800-9000 since past one month FIIs have been busy in adding Bearish positions in Derivatives segment though they have bought net in cash segment worth 7.5k Crores in the past two weeks whilst the Bearish positions added in the same time are worth more than 5k+ Crores.


So it is evident that the market makers are cautious at current levels and hedging their portfolios through bearish Derivative positions which is indicator that it is not preferable to take fresh longs at current levels and Risk reward is tilted to SHORT side based on the fund flows we are seeing as above.