Monday, February 28, 2011

Pre - Budget Snapshot

Nifty snapshot - Budget

Today we have shown the impact of Budget on Indian Markets since 2007. As seen from 4 different charts on first page we can easily make out that the Budget day produces big movements on intraday basis but relatively small percentage movements on closing basis.

A very important thing to observe is that Budget day is actually a trend continuation event. As seen in 2010 the trend was up from the start of February. On Budget day this trend continued upward with follow-up rally for couple of weeks. In 2009 the trend was down since mid February and Budget day produced a good downward swing which also continued atleast till mid March. In 2008, after capitulating in January we were consolidating and prices resumed the major downtrend starting the Budget day atleast till mid March again. The same story stands true for 2007 a year of strong rally but downtrend seen before and after Budget.

Based on the above evidences we think if this time is no different we have seen a good down move since mid February and Budget day should resume that down trend with good intraday moves but small percentage move on closing basis. We will not fully rely on this information and to support our analysis we have shown Elliott wave structure on Nifty on 60 mins chart. We can see that prices are moving impulsively down after completing wave X and are in minute wave iv. We are left with wave v which will take us around 5100 – 5150 atleast.

Given the above scenarios during Budget season and Elliott wave structure we are bearish over short term and today the down trend will resume. Please be careful as the intraday volatility will be very high and prices might move in a particular direction based on certain event with no probable explanation. These are the spikes produced by news but major trend will resume as soon as event fades out.

Also we mentioned earlier that “The steep fall, if coincides with the “Budget day”, will be blamed on policy makers and the news media will find one more reason to explain the fall after it has happened!” We will keep 5400 – 5425 as our crucial Risk management level for the downward move.

We have analysed various sub indices like NSE midcap, IT index, Banking index and we are "NOT" seeing any positive divergences in any of the sectors.

The sentiments and mass psychology will try to find wrong things even in right decisions to sell their positions as the sentiments for us are bearish. We will still keep 5425 on Nifty as crucial Risk management level and will remain aware of the fact that we can be whipsawed given the event today. But it will save us a lot if we are wrongly placed and Budget this time becomes a trend reversal event rather than trend continuation which for now looks low probability!


  1. Since the market action is contrary to what you expected can you please post the new counts as to where the markets are headed?

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