Advisor Speak

Major money making opportunity in this segment

Pratik Vasa, Mumbai

18th November 2016

In a nutshell

Pratik's call of a Sensex bottom for 2016 at 22,300 came good in March 2016 (Read his previous forecasts). Is this bottom now going to be threatened in the ongoing correction? Not likely, according to Pratik, who believes the Sensex will take support around the 25,000 levels and will move on to the 35,000 - 40,000 levels over the next 2 years. But, that's not where the major money making opportunity lies, in his view. Midcaps may be richly valued, some may believe a bubble may be building in midcaps - but Pratik's reading of the chart suggests that the present correction may be a very good buying opportunity into a strong long term uptrend in midcaps. Pratik manages equity portfolios for investors by identifying stocks with promising long and medium term technical trends.

Sensex

In my last article I had predicted that Sensex should reverse from 22300 levels. The low for the year 2016 as of now is 22300. Sensex today is at 26000 levels same as it was soon after Modi was elected as Prime Minister. The recent fall from 29000 levels to 26000 levels if takes support at 25000 to 25500 levels we can expect a new high.

The fall from 29000 levels to 26000 levels has absorbed all negatives and we can expect 25000 to 25500 levels from where a bounce-back is possible. Technically speaking Index absorbs all the negativity at a higher bottom. I expect sensex to make a new high in the next 2 years at 35k to 40k levels. But the rally will not be strong as seen during 2003 to 2007 period. Sensex performance has always remained subdued after non-congress government gets elected.

As long as Sensex does not make a lower bottom which is below 22500 levels we would continue to be in uptrend.

Oil - Brent

As said in my last article Brent had taken support at 26$ which is 61.8% retracement of the 1998 to 2008 rally and should continue to go up to 45$ to test the 200 days Moving average which if broken upside can still go up. Today Brent is 46$. Crude will remain to be range bound with 80 on the higher side and 40 on the lower side. Going above 100$ in the next 2 years looks difficult.

Dollar

Dollar recently has given a breakout and has shown faster move. Dollar can move to 70 levels again.

Gold

Gold if it does not sustain above previous highs i.e 33k levels and if we see selling pressure around these levels gold can correct to 25k levels in the medium term. But definitely, gold is not in the investment zone.

BSE Midcap Index

BSE Midcap Index has made a new high recently and is forming a higher bottom. We can still expect some correction in the medium term but major money making opportunities is seen in the midcap sector. The sector index is seen forming an uptrend channel where the starting point and the first bottom is the support line. The reversal is not seen as long as the lower support line is broken. Within midcaps, potential opportunities are seen in midcaps cement sector, FMCG, specialty chemicals.

Sector Views

Sectors which continue to look good are Private Banks, Auto Ancillaries, Autos, Rural Finance companies, Pharma sector, Farm and Engineering Equipments, I.T Sector, Cement, Departmental Stores, Consumer Durables and Logistics Sector.

BSE IT

BSE IT sector after making a new top has retraced to 38.2 %. A higher top Higher bottom formation is seen. While the index can still correct but could be a good contra call since most analysts are bearish on this sector and dollar has started inching upwards. The sector outlook is not that bullish though.

BSE Infra

The sector is still sideways I would avoid investing due to lack of transparency and government hitting hard on black money which would make this sector more volatile.

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