Weekly Market Recap
Last week, I found a slightly bearish configuration on the market which appeared to have changed drastically this week. The change of setup is not completely surprising since NIFTY demonstrated some support at 21-day EMA (purple line) last week, and the same support held up quite well this week as well.
In the week gone by the benchmark, SENSEX climbed 772 points, or 1.25% to 62501, whereas, NIFTY surged 295 points, or 1.63%. While BANKNIFTY remained flat with a marginal gain of 0.11%.
Current Outlook
I think we are at a potentially critical juncture in the markets, perhaps with a bigger trend shaping up that may surprise us. So, it is indispensable to consider that despite all the talk about sticky inflation, an uncertain interest rate outlook, and recession fears amid the tightening of bank lending, markets have been gradually doing good and scaling up, instead of throwing up arms in frustration.
Therefore, we need to dig deeper into the bigger picture like sector rotation, leading industry groups, turnaround in the beaten-down group of stocks, and broader market insight that will help lessen the noise and prepare us to take advantage of what’s unfolding for the second half of this year. The major turnaround is seeming to be happening among IT stocks, after being beaten down severely and gyrating in a narrow range for the last six months, the stocks are making a comeback provided their significant weightage, which may lead to a lopsided gain in the indices.
Moreover, the technical setup is nicely configured, indicators have enough room to rise before they appear overstretch and market breadth which became a cause of concern in the past two weeks is ameliorating and favors the bulls.
Conclusion
Although the setup is turning bullish, we need to have a strong exit discipline as in the past two years we have seen the sudden cascading fall after a strong setup. Hence, decent entry with a tight stop is the key.
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Be Patient; Be a Savvy Investor..!!
Pankaj