Weekly Market Recap
It was a muted week for the market after having a torrential fall in the past week which was followed by a stupendous rise. We have been experiencing a quite volatile market for the past three weeks, but that is not too surprising given the way markets have risen lopsidedly in the recent past. On Thursday NIFTY fell sharply on the back of rising yield but recovered nicely the next day.
In the week gone by the benchmark SENSEX closed down by 180 points, or .27% at 65820, similarly, NIFTY was marginally down by 35 points, or .18% to close at 19638. While BANKNIFTY was flat with a loss of merely .06%.
Current Outlook
Historically, September has been the weakest month, despite we have seen a fantabulous rally to the new high in the first of the month, however, that concluded with a 60% correction in the second half as we can see in the chart below. Still, NIFTY posted a 1.43% return this month which is quite impressive. Moreover, statistically, we can say that we are heading towards the strongest quarter of the year, October to December is supposed to be the prolific time for bulls.
In addition, in hindsight every pullback has proved to be a great buying opportunity, with that sense certainly this might be a nice entry, however, the current configuration is suggesting otherwise. I believe that understanding the market movement is the key which is not behaving propitiously. The steep rise followed by a sudden fall with elevated volatility somewhere indicates the happening of distribution. And the price action among large-cap stocks has also been peculiar recently.
The recent fall dragged down the NIFTY below the 50-day moving average which is important to consider. Furthermore, the momentum indicators have also turned weak which indicates the weakness may prevail at least in the short term.
Conclusion
There are a few key characteristics that need to take place before I can say we’re back in an uptrend and comfortably buy or hold the long position. First and foremost, NIFTY should remain above its 50-day moving average, coupled with positive momentum indicators. While this may appear not far from possibly taking place, we should patiently until that happens because any single correction could be deep enough to put you in a life-long remorseful situation. Hence, be patient.
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Be Disciplined; Be a Savvy Investor..!!
Pankaj