Weekly Market Recap
In my last note, I pointed about the plausible overhead resistance red horizontal line on the chart and presumed the cup is half full unless NIFTY break above that crucial resistance as the same zone has acted as a major support in the past. This week, NIFTY not only broke above that level decisively, but had a phenomenal lopsided rally thereafter and about to retain a level of 12K mark, it is only 4% away from its all-time high. What a fabulous recovery…!!
In the week gone by the benchmark SENSEX surged whopping 1812 points, or 4.68 to close at 40509, similarly, NIFTY rallied 497 points, or 4.36% settled at 11914.
Current Outlook
The rally this week is being fuelled by the two major sectors technology and financials whose combine weightage in NIFTY is more than 50%. Unequivocally, the technology emerged as the strongest sector and the clear cut winner since the rally started off, almost all the major IT stocks are at all-time high, while financials have long way to go to regain their previous highs. That means if financials continue to perform well indices may reach to summit sooner than later.
Technically, NIFTY breaking above red horizontal line is a sign of strength and the same area should act as a major support going forward. As long as NIFTY hold above that level (11600) new high is very much on the card, however, the caveat should not be ignored. The cause of concern to me is the angle of escalation which is getting quite steep; ideally that is not sustainable and most of the time invite a sharp correction unless there is a boom in the economy in a foreseeable future. It is ardour to predict about the economy as many economist most of the time have failed to answer that question rightly, although market knows that inscrutable path more than anyone else and has acted as a strong barometer in identifying the trajectory of the economy in advance. In short, when everyone is talking about decline in growth or late recovery, the stock market is telling us different answer in the form of green signal. Perhaps, price action is suggesting that outlook is less bleak than presumed, but at the same time it is indispensable to consider that sometimes moves can be embezzled which can only be tackled by selling discipline.
Hence, outlook appears to be positive as long as NIFTY hold above 11600.
Conclusion
Provided NIFTY have had a precipitous move and quite away from support zone it is prudent to look out for individual stocks as few of them are close to support zone where stop is very small and providing descent entry based on risk reward ratio.
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Keep Analysing; Be a Savvy Investor..!!
Pankaj