Friday, September 19, 2008

Rakesh Jhunjhunwala Positive On the Markets

Since a number of days now, I have been talking of a target of 3800 on the Nifty. This morning because of the global weakness the Nifty opened weak and touched that target of 3800. In fact, so close was the prediction that today’s low on the Nifty happened to be 3799.55. And once the target was achieved, the Nifty started moving up. The move up was steady and consistent and so good was the recovery that the Nifty finally managed to close near the highs of the day with a gain of 30 points. The high made today was 4050.10, which means an intraday recovery of 250.55 points. Such a good day changes the outlook totally. Crude, as of now, is trading flat near $96 while gold, after a stunning $70 rise yesterday is up again by $46 or 6%.

Nifty Daily Chart - Hammer Today and Long lower shadows suggest bullishness

Seen above is the daily chart of the Nifty. Three days out of the last four have displayed candles with long lower shadows, as marked by the green arrows. Two of these candles have very small bodies and, in comparison, very long lower shadows. Today’s candle, in candlestick charting parlance, is also called a hammer. And it is named a hammer not only because it looks like one but also because such candles are found near the end of a downtrend and it is said that such candles are ‘hammering out a base’. Options outlet says the following about a hammer.

Hammer According to Options Outlet

So, is this the end of the bear market? Well, we can’t say for sure. The prices have started ‘hammering out a base’, inflation has stabilized, crude prices have softened and India does not seem to be having too much of an impact of the credit crisis in the US. Who knows, this may be the end of the bear market. But hey, look at the world around you. There is so much of pessimism around. Surely, India cannot remain insulated from the problems in the rest of the world. Hmm, maybe it cannot. Or maybe it can. But as far as pessimism around the world is concerned, I would again like to point out what Sir John Templeton said. He said that “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”

Rakesh Jhunjhunwala, according to Moneycontrol says that India is still in a long term bull market and that the current phase is only an interruption to that bull market. His logic is simple. That had we seen the market rise from 3000 to 13000 and then come down to 11000, it would have been termed as a correction. Now when we have seen so much of greed and so many excesses that the markets went to 22000 and then came down to 13000 then why are we not calling this phase a correction too? Shireen Bhan, in that context, in conversation with him mentioned that we have recently seen ‘the mother of all bull markets’ to which Rakesh Jhunjhunwala immediately disagreed and said the ‘the mother of all bull markets’ was yet to come. This conversation with Rakesh Jhunjhunwala will be telecast on CNBC this Saturday at 7:30 pm or Sunday at 10:30 pm. Watch it.

Shankar Sharma of First Global, though,
remains a bear and says that the Sensex may not be able to reconquer its previous highs for the next 2-3 years and that it may come down to 10000-11000 levels.

But Vikas, where does that leave us? Do we remain bullish or bearish? Well, I have given you both sides of the market. You decide for yourself what you want to be. I, personally, am not too bearish on the markets, especially after seeing the candles formed in the last four days.

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