Business | Markets
Indian index lives the name
As witnessed in the past: bear market rallies can be sharp which can surprise most of the investors on the upside and we expect the same to happen if the Nifty (the National Stock Exchange Index) crosses [the] 3,150-3,200 levels, says Rohit Chothani, director at Padmakshi Financial Services, Mumbai.
- By Sean Kelleher, Special to Gulf News
- Published: 22:46 April 4, 2009
- Image Credit: Supplied picture
- Financial Services consultant Rohit Chothani saysinvestors in India must look for the 'green shoots'.
As witnessed in the past: bear market rallies can be sharp which can surprise most of the investors on the upside and we expect the same to happen if the Nifty (the National Stock Exchange Index) crosses [the] 3,150-3,200 levels, says Rohit Chothani, director at Padmakshi Financial Services, Mumbai.
The tone of the message could be pretty much cut-and-pasted into any major index with the exception of the pivotal "trigger numbers".
So, laying it out for clarity, in a word-form flow diagram, it would probably look like this:
- Box 1: the meltdown/ credit crunch experience has tied equity markets to an unexpected level of correlation. All the indices are down. Correlated but down. So down that for new money many investors might ask: "well what's wrong with some correlation?"
- Box 2: down is usually the best time to buy. High is the best time to sell, the signals all say buy.
- Box three: if (virtually) every public market stock requires an external or government stimulus as a prelude to recovery, why not bet on the market and not the stock? This would make trackers and EFT trackers highly attractive.
- Box four: chose your domestic tracker for a risk-free currency position.
-Box five: for added-spice chose a volatile market with plenty of future growth expectation which is where India enters the frame.
That's the thinking that leads us to Chothani to explain where the Nifty was in the dark days of October when: "the Nifty was trading in the band of 2,500 on the lower side and 3,100 on the upper side, both of which have not been violated so far".
Again, like other global markets, the Indian indices seem to be treading water, range-bound, waiting for the grand signal.
For regular savers, for averaging-in, the longer this lasts the better; assuming Chothani's expectations of history's message and sharp bear market rallies is correct!
Caution: don't try and time the market, just make sure you have a reasonable weight in it.
So much for where we were; where are we now? "There was test of 2,500 in March which was not broken and now is the test for the upper end of the band. The last five months of trading has been all tested out in March", says Chothani.
Fun times, yet similar to the rest of the world, as acknowledged by Chothani noting the end March surge as "in line with global peers".
What makes India more interesting within a global recovery story is that the growth potential is more obvious than most other places.
The hunt should be on for "green shoots" which Chothani see's in "higher cement dispatch numbers, comparatively higher automobiles sales figures, and higher steel production".
Ultimately though, with the correlation effect as it is, it would seem foolish to expect an Indian surge in isolation from a global surge.
The reasonable expectation is that once the starter's gun is fired the Nifty or Sensex (the Bombay Stock Exchange index, also known as Sensitive Index) combo would not only make as good a start as any but will hold its position for the longer run.
So how is the position at the starter's line? I asked Chothani, who replies "the technical outlook seems [to] suggest something of a cross-roads with the RSI (Relative Strength Index) indicating that the market is overbought (suggesting booking profits on long positions); whereas if the Nifty crosses 3,150 levels, new long positions can be created indicating stronger resistance."
Less technically, Chothani concludes: "if the Nifty breaks the resistance of 3,150 levels, we can expect further move upwards towards 3,500. If it doesn't, profit booking in long positions is advisable".
For more aggressive investors, you can't leave a stock-picker without asking for a view on specific stocks.
Chothani picks two: Cairn India - "a proxy play for crude oil and available at attractive valuations"; and, Noida Toll Bridge - "generating steady cash flows from its road infrastructure and available at reasonable valuations".
The writer is chairman of Mondial Financial Partners
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