Shown above is the tick by tick chart of the Nifty yesterday. The FM’s speech started at 11:00 AM. As the speech continued to flow out of Mr. Chidambaram’s briefcase, the market kept reacting to the contents of the speech. The major falls during the speech came when the FM announced complete/partial waivers of loans to marginal/small farmers. A slight increase came about when the reduction in excise and customs duties were announced. The biggest fall of the day came when there was no reduction in the rates of the dividend distribution tax and no cut in the surcharge of to the corporate tax rates. After the budget speech, as expected, the market came down because there was nothing very enthusiastic/positive about the budget. A relief rally did come when there was analysis on the budget and when it was clarified that the government would pay the banks for the waiver in loans and would not let it be a complete loss for the banks. 
Now, looking at the daily chart of the Nifty, we find that it is still locked up in a range between 4800 and 5550, and for the past 2-3 weeks in a much smaller range between 5055-5370. Incidentally, the 200 day moving average is also now at 5055 giving a double support to the Nifty. A clear trend of the Nifty would be visible only when it is able to break out of these two ranges.Looking forward in the future, let us try and analyse what will happen to the markets in the time to come. We have already gone through a very steep downfall and the valuations are at a more comfortable level than they were in the beginning of the year. Our last week’s newsletter had mentioned that we are not as badly hit by a US recession as the rest of the world is. Of course, in a bull market or, for that matter, in a bear market there are excesses and that valuations become very expensive or very cheap before the market changes its trend. But looking at the rest of the world and other investment avenues, we have to predict where the money will flow. Our FM, Mr. Chidambaram, after the budget, mentioned that, though there was a decline in the growth rate of the GDP from 9.2% to 8.7%, yet most finance ministers in the world would be very happy to exchange positions with Mr. Chidambaram if that gives them a growth rate of 8.7%. Considering the demographics of our country, the situation in the rest of the world, the situation in the property markets in the world and the prevalent interest rates, it seems pretty obvious that if there is a good opportunity to invest anywhere in the world, it is in India.
Now, with budget out of the way, a big uncertainty is over. Markets don’t like uncertainty. So, with the uncertainty gone, it is only logical that the markets will start looking for a positive (or negative) trigger in the future. The positive trigger could be the coming earnings season which starts with the new financial year. Good forecasted earnings could just be the trigger that the markets are waiting for. A negative trigger could be the situation in the rest of the world right now. Or, some people are even talking of early elections. We can just wait and see which direction the markets want to take.
While the American markets were badly down on Friday, yet we can’t follow them on a daily basis. We have an economy of our own, more independent of America than it is dependent, valuations of our own, and it will not be too long before we start following our own valuations and economy, than to sulk at the other world markets and bring the same pessimism to India. Can’t we also say that the Americans are following us? Their markets may have gone down because our markets went down. Maybe they were worried that, with the strong growth potential that we are exhibiting, we might reduce our imports from America. Could that be a reason for the downfall of the American markets soon after our budget? Well, it’s just another angle from which things could be looked at.
Lets look at some stocks showing good potential right now.
This is the daily chart of Cipla. As seen from the chart, it has broken through its resistance line with a jump in volumes. This could be bullish for the stock in the short term. The previous major pivot low for Cipla on this chart is at 178, which should be a stop loss for the trade. On the weekly charts Cipla has a reasonable bit of resistance at 230-235 levels, which appears to be the target for this trade. The current market price is near 207. Does it make sense to enter into a trade which has an upside potential of Rs.23/- and a downside potential of about Rs.30/-. No, to me it does not. More risk averse traders could keep a stop loss near 198. 
On the daily chart of Maruti Udyog, we find that the price is very close to its resistance lines. The stock has many positives – such as, with the last candle there was a significant price increase, the RSI, which happens to be a leading indicator (an indicator which gives signals earlier than the price does), has already broken through its downward sloping trendline and that the excise duty on small and hybrid cars has been decreased in the budget, which is good for the automobile sector. A movement above 880 should be used to buy the stock for a target near 1060 with a stop loss of 750, for the time being. 
In the newsletter for 22nd Feb 2008, we had recommended Sasken Communication Technologies. Sasken has not moved up since then and still remains a good buying opportunity. Another stock similar to that is Tech Mahindra. Looking at the daily chart of Tech Mahindra, we find that, like Sasken, the volumes have been very low whenever the price has declined substantially. And now when the price is showing almost no movement (very narrow ranges) for the last 2-3 weeks, the volumes have jumped up significantly. This too may be a good buying opportunity with a stop below 650.Happy investing!!!
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