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Nifty looks set to fall to 2950: Networth

This article was posted on Apr 28, 2009 and is filed under Market Outlook

MUMBAI: While experts remain divided on the nature of the current rally, Networth Stock Broking has come out with a report which suggests that the market is at the tipping point and is set to correct 10-15 per cent from current levels.

“To us, it looks like ‘we are extremely near to the TOP’ (as near as 2%-3%) hence clearly, the risk-reward ratio is in favor of a ‘sell trade’. We suggest one to book profits aggressively and also look to short the markets by buying puts or by selling futures,” said Deepak Sawhney, Head of Research at Networth Stock Broking.

The report is based on the following trend in global markets.

* Commodities (metals) & China which started this rally, both have started to correct and in fact are down nearly 7% and 8.6% in the past 6-7 trading days from their recent peaks.

*Of late, strength seen in Japanese yen is some what indicating a reducing risk appetite. Yen has gained nearly 5% from recent top.

* Indian markets, which traditionally are the late starters, have overshot on the upside as we compare the returns vis-a-vis global set-up. Since March 9, world markets have gained nearly 25.8% while Nifty has gained 41%.

* Record level of derivatives out standings: As of this morning (April 28) the total outstanding (open interest) in the derivatives segment was nearly Rs 94,860 crore ($18.60 billion) while the total number of single stock futures (shares) outstanding were Rs 120.6 crore ($1.20 billion). By any yardstick, this is an over-extension of derivatives out standings.

*Finally. 3505 (as per Gann Fan lines) on weekly charts is a very strong resistance on Nifty.

source: Economictimes

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