CLSA tgt 4500 approx on NIFTY.

The S&P CNX Nifty (last 4,080) has set a new bull-market high following five
volatile weeks; further gains are anticipated as the market completes the
advancing phase from the 2003 low. We expect an approximate 10% advance,
but a speculative surge above 5,000 (up 20%+ from current levels) is a
possibility.


The Nifty is in a powerful wave ! advance from the May 2003 low of 920, the
break above the early December peak of 4,046 should lead to another
consistent rally phase. The market’s structure since the 2003 low shows a
number of relationships that support our preferred view:

• Wave 2/ resulted in a 36% decline (Fibonacci 38%) and an
approximate Fibonacci 62% retracement of the wave 1/ advance (on a
log-scale basis).

• Wave 3/ advanced 192% or a Fibonacci 1.618 times the wave 1/ 119%
gain.

• Wave 4/ resulted in a 31% decline (a third and close to the magnitude
of wave 2/) and an approximate Fibonacci 38% retracement of the
wave 3/ advance (on a log-scale basis).

In a five-wave sequence, when wave three is the longest wave, there is a
tendency for wave five to be equal in size to wave one. This setup would result
in the Nifty gaining almost another 40% to 5,685. Another common occurrence
is for wave five to be a Fibonacci.618 times the length of wave one, this gives a
Nifty target of 4,505, 10% above the current level.

Examining the structure of wave 5/ (of wave !) on the daily chart shows that
waves 1 to 3 of 5/ are complete but there are too many alternate wave counts
to state with any certainty that wave 4 of 5/ is finished - so that 3,658 may not
represent the end of the corrective process from the December peak of 4,047.
Interestingly if wave 4 is complete at 3,658, wave 5 of 5/ would equal wave 1
of 5/ in percentage terms at 4,520, and very close to the 4,505 target derived
above from the weekly chart.