For Nifty the range seems to be 12100 on the upside to 9400 on the downside. Sensex, on the other hand, may oscillate between 39800 to 32300.
By- Mustafa Nadeem, CEO, Epic Research
For the coming year, we believe the markets will have certain headwinds rather than sailing easily throughout the year. Firstly, with our analysis, there is a cyclicality in volatility but this tend to erode around major economic or macro-economic event and a much bigger cycle takes the front seat. In past we have seen volatility heightened usually 2 months prior to election and settles down post election as dust settles.
Hence any short term or medium term investor should avoid investing with short term or medium term perspective, as; volatility may hurt the overall returns. The important point here is that post election as it settles down the long term trend remains intact and the overall bullish nature of the market unfolds itself for long term investors.
Keeping above analysis in mind, we believe the market is likely to be in consolidation going forward with some correction that can bring down the valuations to a cheaper level.
Risk aversion will be the flavor. In the backdrop we need to understand there are certain factors that are important as a cue to discount the overall movement. The negative factor for Indian market is the negative global markets which are off their peaks and trading at 1 year lows. The expanded volatility by 80 % from last couple of weeks has already put global sentiments in a negative perception.
The favorable factor with this year end and next coming is the appreciation in the INR and Crude oil prices. INR has appreciated almost 7% in last few weeks while crude has dropped almost 44% from its recent peaks which is a most important factor. This will have significant impact on CAD. Keeping above perspective in background, Equation seems to be positive for a long term i.e. while in short term or medium term perspective like 3- 5 month we expect a rise in volatility that can dampen any directional move.
For a short term perspective we expect market to be in range with upside capped at 12000 while on downside it has support placed at 9450. Hence with our analysis many things are looking to work out in favor of Indian economy in medium to long term view. Any decline from current level which is more than 10% should be utilized by investors to add quality stocks with growth potential and once the volatility settles down one should keep investment horizon for longer term. As In long term risk adjusted returns tend to be better.
While we do suggest to not to be aggressive in initial quarter of 2019 or 2nd quarter as well. One should be having systematic approach with overall strategy to be scattered. Investors for 2019 should understand that any dip is useful when it is more than 10% in a secular bullish market. This helps to bring cost lower and pyramid the portfolio for better returns.
As far as timing is concerned, we believe Post June we expect smoothness due to easing of volatility and pick up in investment cycle. It all comes down to mandate of people in LS 2019 as well. The road ahead for Nifty/Sensex in 2019 seems to be accommodating volatility which has been cyclically down for the last couple of years. While Volatility has been the curse for 2018 as the year started with its expansion and since then we have seen Nifty volatility expanding in a gradual manner, up 68% in the last few weeks.
With Events, ahead of us such as LS2019 and global markets continue to break important supports we expect the headwinds will be there. Though on the other hand, we have crude which is around $42, below $50 mark, which is a boon for Indian economy hence we will see bulls try to make their way out of it. For Nifty the range seems to be 12100 on the upside to 9400 on the downside. Sensex, on the other hand, may oscillate between 39800 to 32300.
(This article is authored by Mustafa Nadeem, CEO, Epic Research. Views expressed in the article are author’s own)