So is it a good time to buy?

Last week, the Nifty had the perfect setup to break the resistance of 5200 - panic of pledged shares hitting the market, global cues not looking so great with the Greek overhang. However, it pulled pretty smartly from those levels. Not a technical analyst by any means (i tend to be a more bottoms-up person), I do have a lot of respect for what the market tells you. So, what exactly is the market telling us -

For one, the market has a strong resistance at 5200 and now people can go back to trading in the 5200- 5600 range. It would be crucial to see whether the market stays in this range or breaks the next resistance level of 5600-5700 on the upside or 5200 on the downside.

My view is the market would stay in that range till the Q1FY2012 results are out. If the results have a positive bias, very likely the range of 5700 can break. Companies like SBI, BHEL, L&T need to have better than expected results to carry the NIFTY to the next stage. If current leaders like Bharti and HUL, ITC disappoint, the rally could be shortlived and we would have more downside pressures. However, we cannot analyze Indian markets in isolation, as we noticed just couple of days back with oil prices being the single most important factor to rally the markets.

In terms of external factors, oil prices is certainly a big factor to watch out for. My sense is given that oil prices is also a big issue for the Obama adminsitration, it will not go pass 110. This being an election year, the Obama administration will try its level best to have a feel good factor for the US public. This means, Oil prices will not rise nor would US markets end lower this year (read risk trade still ON). The release of oil reserves was just one example of such an intervention by the Obama administration.

So, coming back to the question - is it a good time to buy. In general, i would hold on until Q1 results are out. I would also look at a number of niche industrial companies which seem to have fallen off the cliff due to rise in commodity prices and/or policy decision paralysis, however, these are niche companies and market leaders in their space.