Will equity markets hit all time highs as so many experts seem to believe or slip back towards 15,000 in 2013? Should your clients be exiting equity markets as they approach their all time highs now or should they be entering in anticipation of a bull market? Pratik Vasa, a budding technical analyst believes that the Sensex can surprise (or rather disappoint) on the downside and could actually drift down towards 15,000 in 2013, without making a new high above 21,000 in the early part of the year, as many people expect it to. But, that doesn't mean there are no money making opportunities in the market, he says. On the contrary, whether the broad market is in bullish or bearish mode, Pratik has identified stocks and sectors which he believes can make money in 2013. As with all market forecasts, please do keep the standard disclaimer in mind that neither the author not Wealth Forum accepts any responsibility for any decisions or actions you may take whether influenced by this article or otherwise.

In May 2012, when the Sensex was hurtling downwards towards 16,000 levels, and when sentiment was at a low with a falling rupee taking centrestage, Pratik was quite bullish about a recovery in markets and put a target of 19,500 (http://wealthforumezine.net/AdvisorspeakPratik170512.html). He was also quick to add that he did not see the market scaling above its earlier peak of 21,000 either in 2012 or in 2013 and that a secular bull market is still some time away, however bull markets in some sectors are well underway and can strengthen. His call about a rally upto 19,500 has come true. What next, is the obvious question. Here is Pratik's current set of views.

BSE Sensex View

Sensex has not breached the 2008 highs. The rally from 2003 to 2008 was a bull run for the markets but since 2008 we have seen that the sensex is in a range bound with 21109 on the higher range and 15000 on the lower range. In a range bound market the lower range is a buying area and the higher range is the sell area. The Bse Sensex is assumed to form a triangle (5 legged pattern) or a diametric ( 7 legged pattern).

We consider the pattern from 2008 where the fall from 21000 (January 2008) to 8000 (March 2009) levels is a downaward leg (A wave). Rally from 8000 levels (March 2009) to 21109 (November 2010) was an upward leg (B wave). After this upmove we saw a downward leg from 21109 (November 2010) to 15100 levels (December 2011). This downward leg was the C wave. The D-wave opened upwards and is in continuation as of now from 15100 levels to 19500 to 20300 levels but this wave cannot breach 21000 levels.

Now, as per Elliot Wave Theory once the D-wave is completed we will see a downward E-wave where the index would correct to 15000 levels again before starting a new bull run.

In 2013 Dollar is expected to make new highs against the rupee as per the technical studies. The view for dollar also supports the idea that we are not in a bull market and by investing in Sensex would be challenging in getting returns.

My idea for investment in this market is more being sector specific and according to me a lot of money making opportunities are there in this market.

The wave structure shown above is a FLAT formation which is a A-B-C correction.

The A-wave was a (18521-15139 = 3382) 3382 points rally. The entire A-wave was retraced to 80% which completed the B-wave at 15816. The C-wave was expected to open when sensex was trading at 16000 levels and was expected to touch 18500 to 19500 ranges but not breach 21000 level.

The rally from 16000 levels is a channelled move shown in the white channel which is not expected to break 21000 level but end near 19900 to 20300 levels. Overall the market is not in a bull phase except a few sectors.

Long Term View on Dollar V/s INR

Simple technical definition of an uptrend is a Higher Top and a Higher Bottom.

After a consolidation from (2002-2008 as shown in blue box) dollar has made a first new top at 52.19 on 31/3/2009 this is an indication of beginning of a new uptrend. After the first new High Dollar is forming a Higher Top and a Higher Bottom which confirms an uptrend so by definition

Dollar will keep making new Highs over coming months. I will not be surprised to see the rupee quoting at Rs. 70 to a dollar in the coming couple of years. (2015)...

As per the Elliott Wave Theory, Dollar has formed a 1st Impulse Wave from 39.24 levels to 52.19 levels. The 2nd wave has taken a 0.618% retracement to the first wave which is a fibonacci retracement ratio. The 3rd wave is in progress which is likely to achieve a level of 65-70 by 2013 levels which will also not be end of the rupee depreciation. Dollar Long term rally is likely to continue till 2014-2015.

Sectoral Views

While markets may still remain range bound a lot of stocks and sectors are showing bullish trend. While Fundamental Analysts worry about valuations Technical Analyst are concerned about the trend. As per technical analysis premises a trend is likely to continue then reverse.

Sectors which look bullish are FMCG, Healthcare, Consumer Durables, Auto and I.T.

Sectors which look bearish or sideways are Oil and Gas, Realty, Power, Capital Goods and Metal.

BSE Healthcare Index

Healthcare sector is forming an uptrend channel as we see a Higher Top and a Higher Bottom formation in the BSE Healthcare Index but Sensex has still not made a Higher Top since 2008 so it is expected that the trend for this sector should continue upwards till the lower channel is broken after which the trend will reverse.

BSE IT

The BSE IT sector is forming a higher top and a higher bottom formation which is uptrend definition. The consolidation on the monthly chart is forming a triangle which is near its completion. This triangular formation once completed and confirms a breakout on the higher side would confirm the beginning of a bullish trend in this sector. Also the view for being bullish in this sector is justified by bullish view on dollar.

BSE FMCG

The uptrend channel is made by joining the tops which forms the uptrend line and joining the lows forms the down trend-line. While the overall trend is intact on the upside we may see some correction in this sector since it is near its resistance line.

BSE Consumer Durables

The BSE Consumer Durable Index has recently shown some upside breakout and I am very bullish on Titan Industries and Whirlpool of India in this sector.

BSE PSU Index

The BSE PSU Index is forming a sideways corrective pattern where no definite trend is seen.

The pattern is still not completed so one should avoid investment is this sector.

BSE Capital Goods

The BSE Capital Good Index is forming a sideways corrective pattern where no definite trend is seen. The pattern is still not completed so one should avoid investment is this sector.

Stock specific views

Bullish on following stocks.

1) Mahindra and Mahindra Financial Services Private Limited

2) HDFC

3) HDFC Bank

4) YES Bank

5) Colgate Palmolive

6) Tata Global Beverages

7) Marico

8) Titan Industries

9) Tata Motors DVR

10) Sun Pharma Laboratories

11) Sun Pharma Advanced Research Company

12) Pidilite Indutries

13) Geometric Software

14) Infotech Enterprise

15) T.C.S

16) Infosys

17) Cipla

18) Ultratech Cement

19) Castrol India

20) Whirlpool of India

21) Hindustan Unilever

22) Rain Commodities

23) Asian Paints

24) Akzo Nobel

25) Motherson Sumi Systems

Pratik Vasa

www.pratikvasa.com