Market forming a strong Base for Next Rally

Author(s): City Air NewsMr Jimeet Modi, CEO, SAMCO Securities says, "NIFTY50 opened strongly on hopes of interest rate cut but letter succumb to profit booking by the close of the week. The MPC of RBI began their innings with a 0.25% rate...

cityairnews Oct 7, 2016 12:30 0

Market forming a strong Base for Next Rally

Author(s):

Mr Jimeet Modi, CEO, SAMCO Securities says, "NIFTY50 opened strongly on hopes of interest rate cut but letter succumb to profit booking by the close of the week. The MPC of RBI began their innings with a 0.25% rate cut in repo rate thus reducing the cost of capital to six year lows. The near term expectations for the inflation are muted and therefore one more rate cut can be expected before the financial year ends. BP Plc has received nod to set up 3500 petrol pumps in India potentially challenging the monopoly of PSU’s. Events from across the border can create short term knee jerk reactions which the market is capable of handling maturely going forward.

Key Events of the Week: Govt successfully closed Income Disclosure scheme wherein approx Rs 71000/-Crs have been disclosed thus boosting the liquidity in the main stream financial system, some of which will find its way into the stock market. Government garnered Rs 66000/- Crs in the Spectrum Auction, the lowest since the last two auctions which augurs well for the industry and consumers. The auction heralds the end of mad rush for spectrum as the industry has become mature and positive cash flows should start emerging soon which will rejoice investors after long time.

Technical Outlook: Nifty50 continues to remain in the last phase of a corrective pattern in the near term. Bull market corrections lasts on an average for 21 days as per Dow Theory. With the close of this week, 21 days will be over which makes a high probability case for the bull market to resume its upward accent. The correction had lost its momentum on the down which earlier was feared to be intense. The sequence of higher top higher bottom is intact. There is a major support at 8550. Medium term positional traders should trail their long positions at 8550 Nifty50 levels and can buy on dips with stop placed at 8550 levels. Investors are advised to again start accumulating quality stocks to build long term portfolio. Existing long positions should be trailed at 8500 Nifty50 level."