In Oct 2013, I wrote an article on Wealth Forum (Click Here), where I suggested that making money in the market is about taking individual sector calls rather than betting on the Sensex. I also mentioned that the strength of the US dollar will have a big influence on sectoral trends in the years ahead. I shared my views on key sectors that I believed will make money in the years ahead - which included Auto, Healthcare, IT and FMCG.
Its 21 months since I wrote this piece. The last 21 months can be divided into 2 distinct phases - the first 9 months was the run up to the General Elections, where markets rose in anticipation of Mr.Modi's victory. The last 12 months represent the period after Mr.Modi's election.
Lets look at the Sensex performance for the last 2 years and also some key sector performances.
Above is the Sensex v/s Sector performance where we see while Sensex has given 2.7 % from June 2014 to June 2015 few sectors like AUTO, IT, BANKS and PHARMA AND Consumer Durables have outperformed the Indices while Metals, PSU OIL and Gas Power and Realty have underformed. The underperforming sectors which were very hopeful on reforms majorly peaked out in JUNE 2014 soon after Modi became the Prime Minister and are negative from those levels. These sectors represent the classic market wisdom "Buy on rumour, sell on news".
The long term outlook on the markets is bullish but investors need to take a Sector/ Stock specific approach. I am giving below my sector views on key sectors, as well as my views on oil and the dollar - two variables that will continue to influence our markets significantly.
BSE SENSEX is in a bull run, after making a top at 30K it is in an intermediate downtrend. The downtrend is following a pattern where the down days continue for 15 -16 days and correct by 2700 points while the fall gets retraced to 1500 points in 10 to 11 days. After the 11 days retracement I expect it could correct to 25300 levels by Mid-June till we see some further buying. The downtrend reversal would be confirmed by breaking the blue channel upwards in faster time before which we may see some panic selling where markets could have a deep intraday correction which should be considered as a good buying opportunity.
BSE HEALTHCARE INDEX
BSE HEALTHCARE sector is a channeled move where the lower line is a support channel and the upper line is a resistance line. The channel formation is a simple tool to identify the uptrend and the trend reversal will be confirmed when the lower support line is broken.
BSE FMCG SECTOR
BSE FMCG sector seems to have broken the lower support line but a lower top lower bottom formation is required to confirm the beginning of the downtrend. Till some further developments are seen FMCG sector, my view on FMCG sector would remain neutral.
BSE BANKEX SECTOR
BSE BANKEX has made a Higher Top after a breakout from a bullish contracting triangle. The sector after forming a higher top should make a higher bottom after which the uptrend will continue. Banking stocks could be accumulated on market correction.
BSE AUTO SECTOR
BSE AUTO SECTOR has shown a faster move after a sideways bullish corrective pattern. The sector should consolidate in the medium term while the overall long term trend for the auto sector is bullish.
BSE IT SECTOR
BSE IT sector has been forming Higher Top and Higher bottom formation and the entire up-move is forming a channel. As long as the price moves within the channel the uptrend in IT sector will continue.
BSE CAP GOODS SECTOR
BSE CAPITAL GOODS Sector is in an uptrend but needs to break the resistance line which is the 2008 top. Once the resistance line is broken the sector should continue the uptrend.
BSE CONSUMER DURABLES SECTOR
BSE Consumer Durables sector after a giving a breakout has shown a faster move upwards forming a higher top. We are seeing some correction in this sector which will make a higher bottom which ones formed will take the sector to new highs. The long term outlook in this sector is bullish.
BRENT FORECAST (OIL)
BRENT is forming a Long term contracting triangle. BRENT had taken support at 46.81 levels which was 2008 lows. BRENT has formed a double bottom on JAN 2015. Brent would trade in a range of 60 to 90 for the year 2015-2016.
DOLLAR VS INR FORECAST
Dollar is in an uptrend since 2008. Dollar has been making higher tops and should go above 70 levels in 2015-2016.
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