Weekly Market Recap
Bulls which appeared to have loosen the grip in the beginning of this week, resurgent ostentatiously as the week progress to not only thwart the bears attempt, but ostensibly emerged as a conquistador by posting a fifth weekly winning streak in a row.
In the week gone by the benchmark SENSEX gained 425 points, or 1.16% to close at 37020, similarly, NIFTY added 133 points, or 1.24%, settled at 10901. However, BANKNIFTY continued to be a big laggard with fall of 431 points, or 1.93%.
Current Outlook
The undisputed king of sectors so far this year has been technology. Two weeks ago, I alluded that technology stocks have enough room to advance further to support the NIFTY and this week CNXIT made a new high, price action and technical configuration suggests that this leadership would remain intact at least for quite some time in foreseeable future.
In a new bull market or a primary bull market, leadership often rotates between the sectors as the mood shifts from liquidity-driven and defensive issues to earnings-driven and commodity-sensitive ones. Such switching is typically caused by an economy transitioning to a more mature state, as characterized by recent behaviour of the market, when market is no longer reacting on covid-19 pandemic. We are not at that stage yet to call it a primary or new bull market, as the current recovery is at mid phase. Indeed, if there is a pattern, it is a changeover to early cycle leaders instead. So far, the beneficiaries are technology, consumer staples and healthcare.
NIFTY this week has experienced a nice breakout to close above 200 SMA (black line), about which I expressed my concerned last week. It’s absolutely imperative that the price hold above the 200 SMA to resume its secular-uptrend. If not, that would indicate an invalid breakout, which would open up the potential for a nasty decline. As of now, it is clearly finely bullish at this point, evincing that there is no major hurdle till the horizontal red line at 11600 as can be seen in the chart below. That level can be achieved sooner than later, if financials, start to perform in tandem with rest of the market. At present, financials are the weakest spot in the market. It is axiomatic to presume that outlook is distinctly improving.
Conclusion
Since past few weeks, I have been putting stress to look for individual stocks which are relatively stronger and well placed on risk-reward ratio, though this idea would continue to generate good return, however, at this time one can take buying position in NIFTY or NIFTY ETF, provided the exit level is not far away.
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Keep Analysing…!, Be a Savvy Investor..!!
Pankaj