Last week saw lots of ups and downs in Nifty. Good news is that it was able to close up for the week. Another good news is that it was able to hold it’s support above the breakout levels of 4100+. Does that mean we are again in for a rally in the coming days/this week? Let’s asses.

Of late when i was surfing some of the other indian finance news portals, i see the mention of stocks now being expensive. One of the analysts said that Real Estate sector as a whole is extremely pricey right now. This is because Nifty currently is trading at just above 20 Forward P/E. Being in a bear market 20 P/E is huge because during some of the most bull markets too 20 P/E was considered a stretch.

Weekly MACD is still continuing it’s descent. It is highly unlikely that MACD will turn around and start to move back up.

Looking at 5 or even 10 year chart you will realize that Nifty is unable to break past the 38.2% levels. Which will force it to retest the 50% below around 3700.

So what should an investor do in this climate?

Keep buying put options and short stocks that are allowed to be shorted. Utilize every upside in market moves to short further.

Lots of members asked me how will stocks trade before/after budget and should they go long?

Though i have personally asked my friends and foes NOT to invest at this juncture, i personally would say shorting/buying put options is still the best option at this time, budget or no budget. If someone expects a similar rally as that during the elections then i’d say you may be in for a big surprise

By Prasoon Gopal

prasoon_gopal@yahoo.com

Prasoon Gopal is an Analyst with over 15 years of experience in Macro-economics, Technical and Fundamental Analysis and has been been writing articles for many websites and magazines on a regular basis with focus on the Indian Markets

© 2009 Copyright Prasoon Gopal - All Rights Reserved
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