2008-2011 : SHIFT OF FOCUS & LONG TERM TECHNICAL VIEW FOR INDIAN MARKETS

2008 AND 2011 MARKET CRASH :

A COMPARISION IN SECTORIAL INDICES ,A SHIFT OF FOCUS :

In our TECHNICAL VIEWS presented since October 2010 we had pointed out a few important things about future of our markets for the long run.

(A)  Our markets have entered a LONG TERM consolidation phase.

(B)  We had labelled the 2008 crash as an “A” wave and 2009-2010 BULL RUN as a “B” wave in Elliott terms and it was one of our prime TECHNICAL LOGIC for finding out a very important TOP at least a month in advance before an actual TOP was in place on 5^th November 2010.

We expected a LARGER “C” wave to unfold and that is what we are in as we have seen a 25% down move from NIFTY point of view.

(C)  We also clearly said that the coming “C” wave will be different from the 2008 CRASH.

Here comes an Important Development as far as long term picture of our markets is concerned.

We had THREE severe months of crash in 2008 and in those three months almost no stock was spared these months were January, June and October but certain sectorial stocks bounced back very sharply digesting such massive sell off in 2008 and even made new highs in 2010 so these sector stocks are going to rule the Indian markets in the long term.

SENSEX YEARLY CHART

SENSEX  MONTHLY CHART :

(D) We had maintained and we repeat that SENSEX & NIFTY are in long term BULL RUN and we have just entered a LONG TERM accumulation phase after a MASSIVE BULL RUN started from 2003 to 2008.

After this phase of CONSOLIDATION ENDS, SENSEX will EXPLODE and will even reach 50000 marks.

Here comes an important question WHICH SECTOR will lead such a massive BULL RUN ?

We track SENSEX & NIFTY only for short/medium term view on the markets in general but a detailed study of all SECTOR INDEX charts reveal that INDIAN MARKET has been going through a great SHIFT OF FOCUS from the bigger & long term players’ point of view.

This long term money is least concerned with anything in the World Market but is focused on the intact long term India growth story.

This detailed study clearly reveals that TECHNICALS can understand such a long term shift of focus as well.

THE OUT PERFORMERS :

In the charts attached here, one can see that FOUR SECTORS completely underperformed the SENSEX & NIFTY for a significantly long period of time in the massive BULL RUN of 2006-2008. These were AUTO, IT, FMCG and HEALTH.

But all these sectors out performed broader markets in 2009-2010 BULL RUN and in fact out of these four sectors BSE AUTO topped out in 2006, BSE IT topped out in 2007 and BSE HEALTH & FMCG completed a DOUBLE TOP in 2008 so after topping out very early before 2008 these FOUR sectors COMPLETED a larger correction in 2008 and started NEW MEGA BULL RUN which promises to go far away from here.

Simple reason for such EXPECTATION is that all these FOUR sectors are now out performing broader markets by huge margin through this 2011 crash.

We suggest one goes through our comments on all these charts of different sectors.

BSE FMCG MONTHLY CHART 2003-2011 :

Looking at broader market condition and possible PROLONGED accumulation phase in addition to a huge BULL RUN since last three year, this sector may enter a CORRECTIVE PHASE which will be giving us very good buying opportunities in panic during 2012 as we expect a pause in up move for some time.

ITC,HINDUNILEVER,DABUR,MARICO,COLGATE PALMOLIVE ARE THE TOP PICKS IN FMCG SECTOR.

BSE AUTO MONTHLY CHART 2005-2011:

This sector will also be A BUY ON DIPS for 2012 as it has clearly out performed SENSEX & NIFTY by a good margin in the last up move and also in recent 2011 crash.

There are two distinct possibilities that one will be a BREAK OUT of WEDGE PATTERN (can also be called a FLAG) or a down move up to around 6000 but in both cases this sector will give us a very good long term buying opportunity in 2012.

TATAMOTORS,M&M,HERO HONDA,TVS MOTORS,BAJAJ-AUTO & MARUTI ARE THE TOP PICKS IN AUTO SECTOR.

BSE IT MONTHLY CHART 2003-2011:

As clear on the following chart IT STOCKS initiated the MEGA BULL RUN way back in 2003 but were topped out one year early in 2007 and again out performed SENSEX buy crossing previous high with a significant margin so this sector will also not likely to breach 2008 lows and will give a good buy side opportunity later in 2012-2013.

Although BSE IT has outperformed SENSEX till date in 2011 its price pattern does not promise an immediate up side so we will have to wait for a better entry point during the coming months.

INFOSYS,TCS,WIPRO & HCL TECH ARE THE TOP PICKS IN IT SECTOR.

BSE HEALTH CARE MONTHLY CHART 2001-2011:

BSE HEALTH CARE INDEX also started a BULL RUN in 2003 but was a clear defensive SECTOR only till 2007 this sector too went in to deep red during 2008 but it did not remain a steady performer any more from 2009 and reached life time highs in 2010.

So it has also out performed SENSEX in recent crash and now it is showing signs of having entered a CORRECTIVE PHASE which should be an ACCUMULATION instead of distribution phase.

BUY ON DIPS would be a good suggestion for Pharma sector stocks in 2012 for a GREAT BULL RUN ahead.

CIPLA, DIVISLAB, SUN PHARMA, DR REDDY, RANBAXY ARE THE TOP PICKS IN HEALTH-CARE SECTOR.

THE LEGGARDS :

Here are other SECTOR CHARTS which were outright winners till 2008 BUT the SELL OFF in 2008 was so heavy that they underperformed SENSEX & NIFTY in 2009-2010 BULL RUN.

As can be seen on charts these sectors completed LOWER TOPS against their respective TOPS of 2008 and so these SECTORS are the WORST HIT in 2011 crash.

These SECTOR STOCKS are likely to remain under selling pressure through next one /two years and some of them are likely to even breach their respective 2008 lows.

These sectors are BSE CAPITAL GOODS, BSE METAL, BSE REALITY AND BSE OIL&GAS.

It is here by clearly understood how the LONG TERM CAPITAL has gone out of the LEGGARDS and has been slowly being invested in the WINNERS.

BSE CAPITAL GOODS MONTHLY CHART 2003-2011:

A chart in picture form can tell a story far better than if described in words.

The following chart clearly does the same.

A clear under performer in 2009-2010 BULL RUN and so the worst hit sector in 2011 BSE CGS INDEX is likely to suffer most for next few months and we believe that these sector stocks may even breach 2008 lows.

 It is here by clearly understood how the LONG TERM CAPITAL has gone out of the LEGGARDS and has been slowly being invested in the WINNERS.

BSE CAPITAL GOODS MONTHLY CHART 2003-2011:

A chart in picture form can tell a story far better than if described in words.

The following chart clearly does the same.

A clear under performer in 2009-2010 BULL RUN and so the worst hit sector in 2011 BSE CGS INDEX is likely to suffer most for next few months and we believe that these sector stocks may even breach 2008 lows.

 BSE REALITY MONTHLY CHART 2007-2011:

This particular sector was probably worst hit in 2008 and the worst performer in 2009-2010 rise and so was worst hit in 2011 as well.

We first pointed out at the ugly WEAKNESS in reality sector just before the LIC HOUSING SCAM came out in October 2010 till that date almost no stock could perform well through 2011 except LIC H FINANCE itself.

Just a sheer valuation can attract buying in this sector in 2012 BUT we will have to choose the out performing stocks out of the sector in a very very selective manner.

Do remember that such low valuation can generate huge returns over long term but finding out specific better stocks remains a challenge too.

BSE METAL INDEX MONTHLY CHART 2005-2011:

We suggested about a TRIANGLE PATTERN in BSE METAL in early January 2011 and when the TRIANGLE was broken on the down side we advised every one to exit metal stocks.

BSE METAL index almost captured the lost ground of 2008 in the BULL RUN of 2009-2010 but than this triangle distribution made it a weak performer.

This FOUR YEAR long move which includes two down and one up move can be a part of a LARGER MULTI YEAR LONG TRIANGLE but if 2010 high was a lower TOP bse metal can breach 2008 lows as well.

EXIT on rallies will be our advice for BSE METAL in 2012.

BSE OIL & GAS MONTHLY 2005 -2011 :

RELIANCE leads this pack of sector index and this sector also under performed SENSEX in 2009-2010 so it has seen heavy sell off lately in 2011.

For the year 2012 this sector will also likely to underperform the broader market and we advise an EXIT on rallies for the sector.

Another interesting SECTOR for long term investor can be BSE CONSUMER DURABLES the rise from 2003 to 2008 was very strong but as the fall in 2008 was also very severe so this index followed SENSEX in 2009-2010 and it could not cross 2008 highs but interestingly its fall in 2011 is not as severe as of the BROADER MARKET.

Lately there is some selling pressure in stocks of BSE CDS too but we believe that this index will also not breach 2008 lows and will pose greater buying opportunity when the index comes to around 4000 levels.

Stocks to watch at this level are

Bata and titan.

CNX BANK NIFTY MONTHLY CHART 2000-2011:

Since STOCK MARKET is finance straight away the BANKING SECTOR always remain the most SENSITIVE sector.

CNX BANK NIFTY was moving along with SENSEX till 2008 crash but in the BULL RUN of 2009-2010 this sector overtook SENSEX by a broad margin.

That is why the CNX BANK NIFTY does not look to have suffered much at a first glance but in reality banking stocks are also worst hit in 2011 crash.

We do not expect the CNX BANK NIFTY to breach 2008 lows but we neither expect CNX BANK NIFTY to out perform SENSEX & NIFTY in next one or two years.