Oct-Nov 2013 - Nifty 4500, USDINR 75-80?

I am sure you have had enough bearish calls.
I also know that it is completely in vogue to be bearish on the Rupee and Nifty.Its also clear that Rupee is badly oversold.

The reasons for Rupee's performance and Nifty's decline have been analysed to death.Even a "paanwaala" now knows India's CAD is unsustainable.

So what am I trying to do here? Why add to the already overcrowded bears' county?

I think floating currency rate is a measure of relative confidence. And confidence cannot be overvalued or undervalued but surely can be either built or undermined. Confidence will be reflected by whether capital wants to come and reside in a country or not.

In this world of hyper-volatility, with trillions of dollars floating around it is impossible to mathematically calculate capital flows in or out of a given country.
So this is an attempt to read the market signals and them come to a numerical conclusion for Nifty and Rupee.

This is NOT an attempt to justify any levels for the Nifty or Rupee....its just an attempt to read markets.So no fundamentals here.

At the outset let me warn you, I am a horrible chart reader.Surely not a technical analyst of any kind. I may get this horribly horribly wrong.
I am just trying a different perspective and please take it that way.



So here we go.....

Have a look at the two charts below...

First one is the Nifty....Second is the Nifty in Dollars.....(Src :Bloomberg)

As can be seen, both charts have broken down from very long term triangle formations. If I understand it right, such breakouts, on the up or down side, are likely to lead to fast big moves in the direction of the breakout. In this case it happens to be downside.

The Dollar Nifty is around 78 right now and if charts are any indication,and of course if I can read them right, then it looks like headed towards the 50-60 range. Lets take average of 55. That would mean a cut of around 30% cut. But remember its the Dollar Nifty.

On the Nifty, having broken the lower trendline, if it sustains below it, then next significant support seems to be around 4500. So maybe a cut of around 15%.
That would leave Rupee to fall around 15% to get the Dollar Nifty to 55.

Put two and two together....and you get the title!!

Some of the other technicals that I tried my hand at went horribly wrong. So feel free to neglect this one.....LOL!!!