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Charts & Analysis

Nifty Snapshot: Markets at a 52 Week High

At the close of 5703, the Nifty’s at a 52 week closing high. A few notes will follow this chart:


(Click for a larger image)

What this tells me:

  • We have broken out of a 1 year range, but to be honest the larger resistance is that 6300 figure in the distance.
  • We are back to high valuations (>18 P/E) which might reflect easy money and the hope that government has gotten its act together.
  • As you can see, this "down" cycle didn’t see the P/E go too low, nowhere near the 12 levels that one would consider a great time to buy. It could mean that we’re reaching a new paradigm (where the 12 P/E simply doesn’t happen) or that the low is ahead of us. I think it’s the latter.
  • The Daily Moving Averages or DMAs are way away. We’ve gone up very fast in a month, the 200 DMA and 50DMA are both way below the current index number. And we’ve had a golden cross (50 crossing upwards of the 200). Finally both DMAs are pointing upwards. These are signs of bullishness but remember that the DMA is a lagging indicator, not a current one.
  • kamsam says:

    Hi Deepak,
    >18 PE on Stand-alone basis is slowly losing relevance with so many companies with large subsidiaries.
    On a consolidated TTM EPS, the PE is about 16.7 or so, which is neither cheap nor expensive
    Also, in case of Stand-alone numbers if you adjust for BPCL, the TTM EPS would rise to about 305-306, resulting in a PE of 18.7. What i do is, take out the stock and treat Nifty as 49 Stock index
    I am not advocating OMC adjustment but their earnings are dependent on when GoI issues the subsidy cheque, March quarter was bumper whereas June quarter was terrible
    Also going to 12 PE is not about Nifty crash alone. What if we just trade between 4,800 and 6,500 for next 12-18 months?

  • Guruprasad V says:

    I firmly believe most of the people have missed this rally. Pros simply didn’t expect this much. Because of this I believe there is still room for rally. Everyone are waiting to buy at lower levels and expecting a correction and profit booking. If markets are going to break highs, then profit booking is definitely not going to come. Sentiment indicator favours rally. Disclosure: I’m long in the markets.

  • Yes as said many of people has not expected the rally very soon and the gap up has take hugely in upside direction. We expects markets to touch 6000 within this Diwali. Some small correction of profit booking is there in this week, this can be used a chance of fresh position to buy.But most probably market may touch 6200 within coming March 2013, if there is a chance of without changing an Government.