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Is it the time to book profits?? Is themarket giving a final opportunity to review your portfolio??

Hi, I am Prashant Sisodiya and I welcome you all.

Indian markets are highly volatile in the last couple of sessions. We have seen a sharp recovery in markets from 15200 levels to 16700 levels. Many bearish indicators have turned bullish from a short-term perspective. But the important question is whether this rally is going to survive or this was just a trap of bear market pullback.

To understand the market's next move let's check on some economic parameters:

1. USDINR is currently trading at all-time highs which is near 80 levels which indicate Indian markets are more expensive at current levels than at 18600 levels when USDINR was at 75 levels. But we are currently ignoring the fact that the more time it holds 80 levels more money will shift from Indian markets to other developed nations and the more severe the next phase of correction will be but the crowd is bullish on the Indian market with INR being at all-time low, this may be the serious trapping.

2. Prices of crude oil are started to cool off from the highs of $130 to below $100 levels. so this is a good sign for the economy if oil stays below $100 but the concern is this might be due to the unstable demand from the various sectors. The current reduction in the prices of crude may be the early sign of Deflation which is more severe than Inflation.

3. Latest Quarterly results of Indian companies may indicate a revival of demand and improvement in margins going forward but judging the market sentiment based on the performance of 1 quarter doesn't seem appropriate as this demand may be a bullwhip effect and may lead to disruption in supply chain and that will cause deflation or disinflation.

4. Job cuts by leading Giants like Microsoft, Tesla, and Apple also indicate that these companies are controlling their expenditure and very soon these Giants will announce the shifting of their Capex to the next cycle and all these are signs of negative GDP growth and demand crunch.

5. Current Inflation rate in the US is at 9.1% and the current interest rate in the US is 1.75%, this indicates we can expect a 100bps rate hike in the upcoming FOMC meeting. ECB has also recently hiked the rate by 50 basis points and this indicates the situation worldwide is not normal and higher energy and food prices worldwide may take down many European nations.

6. Right now yield curve is inverted and the US 10y bond yield is trading at 2.77% whereas US 02y bond yield is trading at 2.99% which indicates govt is raising money for the near term, they might be thinking recession is unavoidable for the US.

Now let's talk about some Technical parameters to understand the medium-term view on markets.

Currently nifty is trading at 16700 levels which is above 50DMA, and 100DMA levels, and may face resistance near 17000 which is 200DMA. In past many times during the bear markets like 2008-09, markets have sharply rebounded to 50DMA, 100DMA, and 200DMA but every time it faces resistance and corrected sharply and we are expecting the same things as markets have sharply rebounded from 15200 levels but may face a hurdle near 16800-17000 and now this time correction may be more severe, it may test fresh low as the crowd is already been activated to buy the dip. many large caps are available at discounted rates. Market commentaries are started like the recession is not going to impact the market, everything is priced in, and so on. But the fact is this will be trapping and we may not see such levels also in the next few years. It's like what happened in Maruti in 2017 when it was near 10000 levels, the stock was giving breakouts and bullish on all parameters but we have not seen such levels till 2022. so such types of patterns are also visible in ICICI Bank, SBIN, Auto stocks, etc. So here my point is not to sell everything but rather we can take some hedged position because the second half of 2022 will be highly volatile and our portfolio may not survive.

Disclaimer: This post is for educational purposes only.

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