It was a day of positive consolidation at the markets. Though markets witnessed a small bout of profit booking mid-day, the indices managed to hold on. The entire metals pack and capital goods stocks went home with good gains. Volumes were not too bad as well. The Sensex closed up 186.04 points, or 1.8%, at 10534.87, while the Nifty was up 45.55 points, or 1.42%, at 3256.6.
Where is the bull rally likely to end?
Sandeep Bhatia of Kotak Institutional Equities feels the extent of the bull run in markets has come as a surprise. "The current market is exactly the opposite of the one seen in October-November 2008. At that time, there was complete risk aversion and valuations completely fell off a cliff. Now, the risk aversion is coming off and risk appetite is increasing, which is why the market has gone up sharply in the last three weeks."
According to him, markets would peak at around 3,450 and 11,500-12,000 on the Nifty and Sensex respectively. He believes markets should stop rallying in a week or so and take a breather for some time. "The fundamentals of this market need further clarification and the outcome of elections would be a key determinant for the same." He sees a 10% upside in the near-term.
Jordan Kotick of Barclays Capital said the current bull run can continue into the second and third quarter of 2009. He is bullish on global markets for the near term, including Sensex and Nifty. He feels the Sensex can gain 1,000-2,000 points. "We believe 10,600 to 11,000 on the Sensex is important. So, once you get through there we can see the market easily adding a 1,000 or maybe 2,000-points to the Sensex before we start to re-evaluate later in the quarter."
Nitin Rakesh, Chief Executive Officer, Motilal Oswal Asset Management Company, said what started as a relief rally has turned into a disbelief rally. "The best indicator of the fact was that at every level, people were looking for selling out."
He feels there seems to be case for both the Nifty and Sensex to go and test those levels. "Whether it happens before the market takes a breather, whether it happens one way is anybody’s call, but clearly the market has been giving us good strong intra-day corrections. On Thursday, which was the last day of the previous week, the market saw a pretty large move intra-day. Today, we have seen some pretty interesting moves on the downside, then the markets recovered, and came off again. As long as people are out there with cash levels, we will continue to see strength in the market. I think there are a lot of people with cash in the market right now."
E Mathew, Director, Mathew Easow Fiscal Services, said he would have liked the Nifty to go down a little because it has been a heady run and broke past 2,970. "The medium-term trend is clearly up above 2,970. We touched 3,300 also, but we need to do a bit of base building. I will be happy if we go down to round about 3,150-3,170 zone, do a bit of base building, and then take out the 200-day moving average. As long as we sustain above 2,970, the target for this move is 3,700 to 3800. It is not going to stop at 3,450. But the pace at which it is going is little alarming. I would be happier, if it went at a slower pace."
Have the markets bottomed out?
Kotick feels it is too early to assume that secular bear trend is over and markets have made a bottom.
Robert Doll, Vice Chairman and Global CIO-Equities, BlackRock, said no one can pick a bottom and that one can only try to identify the bottoming process. He added that markets are still in bottoming process and are moving into equities from cash. "We are in that bottoming process, and as a result our main message has been dollar cost average, slowly but surely out of cash and treasuries into equities and corporate bonds. We still feel slowly but surely that is the right thing to do."
What should investors do now?
Rajat Bose of rajatkbose.com said this is a strong intermediate uptrend. "We are once again noticing a course correction that we did last week. In this, maybe we will test 3,200 levels but I am not expecting the major support area of 3,175-3,125 to be violated."
Even global indices, Bose added, are also close to major resistance levels. He advises investors to book profits and exit markets. "So, there is some profit booking in all markets. Whenever open interest declines, the market shows positive gains. That is actually a weak bull market or sign of a weak uptrend, so you should definitely take some of your profit and get back home."
Source: Moneycontrol
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