India or Euro Zone that's under more Trouble?

World markets have hit their 3-4 month lows on fear of impending Greece default/ Greece moving away from EURO. The result has been Currencies weakening against USD & JPY. Dollar Index at almost yearly highs.

We (India) are no different the Index has correctly around 14% from the year to date high. The reasons are varied in nature. 

Policy Paralysis, High Inflation, Low Growth, Current Account Deficit, Currency Weakening. 

Lets for a while shift focus to the Currencies. Although its not appropriate to compare USDINR to EURUSD (As the former is not a free-float currency). 

USDINR & USDEUR - 1 Year Charts

Assuming that all the problem is just with the Euro Zone & India is free from any problem of our own would be living in denial. Currency is the Indicator of Good Health of the Economy. The chart tells us that EUR has weakened 10.81% against the USD in the past 1 year however our Rupee is down 19.91% against the Greenback in the same period.

This clearly shows the flight for safety by investors (FII's pulling out money & don't seem to be interested to come back until the Policy actions are taken & key bills are passed in the Parliament. The recent Tax fiasco to tax any M&A that has an Indian asset involved has not gone well with the FIIs too. 

Dollar Index: If you want to know what is a Dollar Index. Please read it here.

Dollar Index is nearing its December Highs of 81.51 & a breach of it can strengthen it further & taken it to 84 levels & subsequently to 87. Chart clearly indicating that money is moving towards Greenback even the precious metals are being dumped for the Greenback!

Bottom Line: The government has been disappointing in passing any key reforms that would accelerate the growth. Even the Crude crashing has not helped us to reduce the deregulated Petrol Prices (Because the reduction in Crude price is offset by Rupee depreciating against the dollar). So still we end up paying the same amount for our imports even though crude has corrected.

It's an excellent time to pocket in ETF's of NIFTY & BANKNIFTY slowly in a SIP way for long term. Of course the trade on the long side does give good Risk to Reward Ratio at around 4840-4880 levels as lot of Index stocks are nearing crucial support area.  But as some genius has said Sell May & Go Away  - Its better to wait out May & Enter in June as you never know the news that may come out in May :-).

NIFTY - Geometry at Work

It's been a while since i blogged but the movements in NIFTY today inspired me to write a quick post. Not that I had expected the exact same movements but was quietly confident of the direction based on the charts. Whats amazing is the way the Geometries are at play in the Markets just that we sometimes get swayed or biased with noise (read noise as news). Anyone still wondering what the news is - can read it here.

Lets quickly dive to the charts.

NIFTY on Weekly Time Frame

NIFTY took 13 months to break out of the Descending Triangle (Nov'10 to Dec'11). Once it did it faced resistance at the Rising trendline of the previous bull run (From Mar'09). Today the NIFTY touched the Descending Trendline support & has bounced significantly indicating that 4988 is critical level. Also the 61.8% retracement level for NIFTY (From the rise of 4530 to 5630 comes around 4950 & 50% retracement levels are 5080. A closing above 5080 today is a good sign so now on weekly charts once we move above 5250 (Refer to the next chart) we are well on our way to 5700 levels again.

NIFTY on Daily Time Frame

NIFTY is again in a sort of Descending Triangle of its own after its breakout in early Jan'12. Today after making a low of 4988, NIFTY has given a close above 5100 levels & is tad below the 200 Day Simple Moving Average. (200 Simple Moving Average is 5114.97 & NIFTY closing is 5114.15).

As the geometries suggest (encircled in the charts) the next move would be towards 5250 & a breakout would lead the indices higher to 5500 levels & to 5700 in next few months (Probably a quarter).

Let me know what you think of this post.