Weekly Market Recap

Wow…!! What a Week it was! The NIFTY recorded its strongest monthly and weekly gain in the past two years that ended with a bang. The upsurge in stock prices fired up which helped the indices to recoup their last four-month losses. This is precisely what I have been writing and expecting for the last three weeks. Almost all the sectors participated in this rally but particularly growth stocks like technology resurgent and outperformed leading the way.

In the week gone by the benchmark, SENSEX gained a whopping 1498 points, or 2.67% to reach 57570, similarly, NIFTY surged 438 points, or 2.62% to re-claim the 17K mark and closed at 17158. While BANKNIFTY slightly underperformed this week with a gain of 2%.   

Current Outlook

The NIFTY is rising in a feverish manner with the back-to-back gap-up opening, as I mentioned earlier it is quite likely price may reach the top of the channel sooner than expected. Currently, the price is above the 200-day SMA (black line), most importantly the rally is backed by heavy volume as can be seen on the chart which suggests the price may sustain at a higher level for quite some time or even rise further. The NIFTY is taking a parabolic move that can rise ostentatiously above the channel towards its previous peak.

Though there are myriad possibilities at the current level that mostly favors the bulls, one such scenario is NIFTY breaks above the channel and have a minor pullback up to the channel and rise further to reach the new high. However, the problem with the parabolic advance is it mostly ends up with a burst which is not propitious for a sustainable rally. But the current advance is in the initial phase which might have a long run to go before it gets bursts.

Certainly, it will not be an easy period to navigate from the current level, however, investors seem to have digested news of inflation hitting a multi-year high amid mixed expected economic data that spark debates surrounding the central bank’s possible reaction. Recently, news this past week appeared to strike the right chord, with a decline in 2nd quarter US GDP signaling a slowdown in the economy, which could lead to less aggressive Fed action and a slowing of their rate hikes later in the year.

Thus far, the current technical configuration favors the bulls. Difficult to say, whether the earnings season has provided a boost, but deeply oversold stocks rallied after reporting results that weren’t always stellar.

Conclusion

All that is to say the market is working its way higher. However, don’t be complacent with a down trending channel as NIFTY is still in that channel, in the past two instances NIFTY has reversed sharply after touching the higher end. Hence, we may remain bullish but with exit discipline.

Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].   

Be Patient; Be a Savvy Investor..!!

Pankaj