Nifty closed at 22.75 on 23rd Jul'10. Nifty's PER(Price/Earnings Ratio) chart from the year 1999 is reproduced below. PER exceeded 24 only on two occasions ie. in 2000 and 2008, after a gap of eight years. On both occasions heavy market crash followed and PER came down to 12. As financial cycles are generally of eight years duration PER exceeding 24 may not happen now and then. Therefore, ordinary retail investors are advised to ignore the profit beyond 23 (2+3=5, all fib numbers) and stay away from the market till PER reduces to a reasonable level after a correction. Who are extremely confident and able to take risk can ignore this and try their luck.
Nifty @ 23 PE Ratio -> 5509
Nifty @ 24 PE Ratio -> 5748
Lakshman Rekha for Nifty is 5566 (Major Hurdle). Once closes above this level for 3 consecutive days, then Nifty is sure of reaching lifetime high of 6279. Considering the above scenarios this upmove will terminate around 5500 levels. 5500 call has the highest open Interest for august series reflects the nifty's inability to cross 5500 levels by august expiry. Similarly highopen interest is seen at 5400 put level. So, the downmove is also limited to 5400 levels. Let's wait and watch the way ahead after august expiry.
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