Monthly Archives: December 2012

Why Prices of Gold not falling in Indian Market???

Or

Why Gold is Expensive in Indian Market.

Many Investors are amazed at this point in time, when Gold was continuously falling in International markets, but not in Indian markets, basically it has to follow the suit and react accordingly.  Investors are right, but pricing model of Gold is not as straight.  In this article we try to investigate reasons behind variation in Indian Gold price and its prices in International markets.

Before going further we should take one glance at some of facts & figures about Gold.

  • First and fore most reason is India is net importer of goods & services, including Gold & Silver.
  • Whether we believe it or not Indian is the world’s largest consumer of Gold, India accounts for nearly one-third of the total world demand for gold.
  • Indian is not largest consumer but also largest Importer of Gold, and Average rate of growth of import from 2008 – 2011 is 26.8% p.a.  Gold’s share in total import bill of the country has gone up from 8.1 per cent in 2001-02 to 9.6 per cent in 2010-11.  In terms of percentage share of gold and silver combined were the 2ndmost imported commodity in 2010-11.

From above facts it can understood that India is the biggest consumer and importer of the Gold, due to variety of reasons, which can altogether become different topic to discuss for.  Now, coming to the point, because of India is net importer of Gold, price of Gold varies with the exchange rates from which India is importing.  Moreover such transactions happens in Dollar, considering most liquid and globally accepted currency; so price of gold varies with movement in US Dollar with Indian Rupee (USD/INR).  So if Rupee appreciates in compare to Dollar, price of Gold tends to fall, and if Rupee weakens so the Dollar appreciates, price of Gold increases, irrespective of fluctuation in International price of Gold, and obviously with fluctuation in International prices of Gold, pricing in India will be accordingly adjusted.

Above points can be looked with two base case scenario, one in which only prices of base currency changes and not the actual price of Gold, and other scenario could be prices of Gold changes without any change in currency quotes.  In real world, both scenarios occur simultaneously and a price of Gold varies keeping every aspect in consideration.

Lets look at first scenario, where a price of Gold remains static in International market, and we only notice change in price of Gold due to change in currency valuations.  If Rupee depreciates in compare to Dollar (Base Currency), for example current USD/INR quote is 55 and if quote rises to 56 than it means Rupee is depreciating in compare to Dollar, than in that case prices of Gold will rise; whereas if Rupee appreciates than prices of Gold tends to fall.

In second scenario, where we only notice fluctuation in price of Gold, assuming there is no change in currency quote.  It is very much obvious that keeping all other things constant, with rise in International price of Gold, inevitably price Gold in Indian market will rise.

In practicality things are not as simple as we explained above, commodity prices are influenced by number of factors namely, price is function of demand & supply, fundamental reasons which can affect the commodity prices and last not the least any asset class including commodities are influenced  by the speculative forces.

EQUITY MOMENTUM CALLS FOR 18/12/2012

Recomm Scrip Last Close BPL-1 BPL-2 Stop Loss Note
SELL REL INFRA 515.5 495 485 521 Sell Below 510
SELL BPCL 344.9 332 322 355
SELL SIEMENS 669 650 642 685 High Risk
SELL WIPRO 370 355 349 376 High Risk
SELL ONGC 257.8 250 246 261
Please don’t forget to read disclaimer attached below

Dont try to jump in the trade, if Nifty is turning positive.

As such, i sense that most of the indices are trading near make or break level, and today’s announcement will drive the market.

 

EQUITY MOMENTUM CALLS FOR 17/12/2012

EQUITY MOMENTUM CALLS FOR 17/12/2012
Recom Scrip Last Close BPL-1 BPL-2 Stop Loss Note
SELL CIPLA 403 392 385 410  
SELL BHARTIAITEL 312 300 295 320  
BUY RELIANCE  840 855 868 828 High Risk
SELL RANBAXY 498 491 480 506  
BUY PNB 830 855 862 818  
BUY WIPRO 375 385 390 370 High Risk
Please don’t forget to read disclaimer attached below

Nifty- Wait for breakout

Last week, we were of the opinion that Nifty gave initial sign of weakness, but this time it proved to be slightly premature.  During the last whole week Nifty moved in indecisive fashion.  Let’s not discuss what happened, we talk about what is next.

NIFTY AS ON 14 DEC, 2012

NIFTY AS ON 14 DEC, 2012

I start with basics,

  • Undoubtedly, Nifty moved in an uptrend, where every dip is a buying opportunity, as long as price remains above 5700 level.
  • To go long on Nifty, I need to see move above 5925, it is good sign if it closed above.
  • To go Short (for taking trading opportunity), Nifty should move below 5810.
  • From Fridays closing it appears that Nifty will move higher.

Also, don’t forget to look at our stock specific recommendations.

Technical Research Advisory

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I will not bore you with big and boring description about market, and at last give you no clue or direction.  Here, I try to be straight forward in most of the case, sometimes you have to give understanding, and at that point in time I will take some liberty to bore you.

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Its time to go short on Banks…

Yes, brace up my friends, banks are loosing up momentum, after last wonderful rally.

Bank Nifty at CMP – 12301 is showing initial sign of fatigue.  Any aggressive trader can take short position in bank nifty keeping a strict stop loss of recent swing high or 12480.

Stock specific:-

ICICI Bank – 1113

Sell strictly below 1100 (take position not on spikes, be smart to initiate position)

Stop Loss – 1130,  with a target of 1050

SBIN – 2294

Sell below 2290 with a stop of 2330

Bpl-1 2225  Bpl-2 2150

(Above observations are for educational purpose only)

Dollar Index will continue its upward jouney??

As on 06th Dec, 2012 Dollar Index closed at 80.23 levels.

As you can see in below attached daily chart; Index is going to face resistance of its 200 Day EMA (Exponential Moving Average) at ~80.58 also at same place recent swing high will play its role, but if prices breach this level successfully than prices can go much higher. We sense that Dollar Index will manage to cross this resistance; supported by the fact that on daily chart Index has managed to break its minor falling trend line, and on weekly chart (also attached below) Index is trading above its 200 Weekly EMA, and as you can see after making a dip till 79.56 prices picked and about to give close higher.

Dollar Index - 80.23 As on 07 Dec, 2012

Dollar Index – 80.23 As on 07 Dec, 2012

Dollar Index Weekly Chart As on 06 Dec, 2012

Dollar Index Weekly Chart As on 06 Dec, 2012

I would like to go long on Index with stop loss of 79.56 with an initial target of 81.30

First Sign of Weakness in Nifty

After almost a year I have started tracking Indian market again.  As, you should not forget your roots…hmmm.

I captured move in Nifty when it was trading around 5600 level, unfortunately could not take any trade, because I was just testing myself, whether I am on track or not.  I was expecting Nifty to test 5870 levels, but fortunately it bit passed off slightly more, and as expected media bulls are in force to give you 100 odd reasons and justifying current move (they have to because they are paid for that…absurd).

Lets come to main point, I don’t want to waste your time by saying what happened, I am sure, you are interested in knowing what is next.  As such, I am not an astrologer to forecast future, but I will tell you what I can see on chart.

NIFTY AS ON 07 Dec, 2012

NIFTY-5907 AS ON 07 Dec, 2012-

Today, I saw weakness setting in the chart, by no means am I saying it’s time to go short, but it’s not time to go aggressive here.  You must be thinking, than why he is talking now, but to answer your question, I am just seeing first sign of weakness, waiting for confirmation, and don’t worry I will also comeback with a point when to enter a short, at that time I will not tell you, to wait.

My only fear is, from this level I can’t overrule a spike, by that I mean some further gains.  Let’s see, what Nifty does.  My advice is very clear- if you are holding longs than tighten your stops, and hold position, don’t add further.