Every trader knows the FII inflows drove the markets.

The time to take (their) profits came on Diwali is what everyone believes.

But actually, it came in late September as this chart of NETT flows of FIIs & DIIs shows.

 

 

 

The FII Nett chart is more stark. The slide started in late September and continues unabated save a few blips.

 

 

The “area” in the positive zone is far more than the “area” under zero. That raises the question, again, of how much more bleeding is in store. Or, the other criteria that becomes relevant is at what Nifty levels will there be NO profits to book?

 

For that we must see the Nifty charts.

 

 

 

It doesn’t take rocket science to see that the main supports in the WEEKLY bar chart as at 28^th Jan 2011 shows 3 main levels: 5339, 4777 and 4666. The early investments were reportedly made largely by FIIs. It is a moot point if that is in the lowest 4666 levels or 4777 level. Thus the 5339 level is still profitable to exit at and so I would expect it to be breached in the course of bottoming out. Since the flow out is slow because of negligible domestic buying, the grind down would be equally slow and painful.

 

Trying to go long on the bump ups that come by would be risky if not hazardous!!!

 

The principal consequence of this slow and determined slide of the Indian markets will have one certain effect: The total alienation of the retail investor. It’ll be a long time before that category gets energized again.

 

Meanwhile, the trade would remain down and the positional trade would possibly be the best strategy.

 

Trade safely!

 

@niftygroup and @jsvasan