Market levels – still a buy?

This has certainly been a rather exciting week for the markets and today promises to be no different. From the 3 month lows to the two week highs the Nifty has seen it all this week. I had earlier given a buy call this week for MF and I hope some of you did that. Yes, the up move of the last 3 days has been contrary to the general expectations which anticipated a further drop in the Nifty on US Fed signalling the start of the rate hike.

Why has this happened? Well, there can be many theories – it can be that once US Fed actually bit the bullet, this is more like a relief rally. Or maybe, our markets were viewed to be in the oversold territory and thus seen as attractive to buy. Be that as it may, it will be important to examine as to whether the rally is likely to last and, more importantly, is it still a good idea to buy now? In the stock markets we only remember the last few days, so it is important to take stock and see where we are. Note these:-

  • Nifty level now is 7844, whereas the 52 week high and low were 9119 and 7539 respectively. We are way near the low rather than the high.
  • Yesterday the Nifty level just crossed the 30 DMA which is at 7820. It is still considerably below 50 DMA which is at 7961 and way below the 150 and 200 DMA.
  • Mid cap and Small cap indices are above all DMA levels.

Based on the above I am inclined to think we are in a buy zone for the Nifty stocks and in general the larger cap stocks and MF. As far as the mid caps and small caps go, I had said earlier that we should wait for the quarterly results and I still hold that view. In the large cap segment stocks like L & T, M & M, Tata Motors, Infosys and many others have been battered and are turning around now. The attitude of an investor should not be that we were unable to catch these at the lowest point – it should rather be that these are still priced at very attractive levels, despite the situation of the last 3 days. As usual, buy in small lots and be in cash, there could be a lot of surprises yet.

As far as MF buying goes, I have bought into large cap funds and diversified equity funds this week. If you have not done so, levels of 7800 are still a good buy. For other categories, I continue to wait for January.

Where do I see the markets going? Over the next 3 months, my earlier call of the Nifty being in the 7800 to 8400 range is still valid. I think we may even go down to 7500 or up to 8500 but these are going to be very strong support and resistance levels to break.

When should. you buy – now, in January after the quarterly results and just after the budget when I expect the markets to be the lowest in 2016. Of course, I may prove to be wrong but that is the way all indications are.

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