Weekly Market Recap
Since last 2 weeks, I had been writing that I am expecting correction in benchmark indices led by correction in bank nifty; especially in private banks and my expectation fulfilled this week. However, market has managed to recoup half of their losses in last 2 days of the week.
On Friday, the Sensex settled at 38389, lower by 255 points or .66% and Nifty closed the week lower by 91 points or .78% at 11589, while Banknifty down by 2 % or 580 points.
Current Outlook
It appears, the market has so far survived the recent pullback, while the issue with the VIX (volatility Index) combine with the negative weekly technical formation on chart does make me to think about further pullback or weakness on benchmark indices. I’m not saying the market is about to crash, but the setup is not positive. Moreover, technical indicators also suggest that upside momentum has deteriorated and downward momentum is building up. On the bullish note, the advance decline ratio was slightly positive in last 2 days of the week.
Some interesting facts, until recent peak in Nifty and Sensex, apart from Reliance both IT and financial stocks had contributed a lot in recent rally as their combine weightage is more than 40%. However, financial has lost their grip; consequently we have seen the minor pullback in indices. While, IT stocks remains at their peak, apparent reason might be appreciating dollar versus rupee. I think slight correction in IT stocks can lead to major pullback in indices, though, so far they have not prognosticated any sign of impending pullback. Hence, it is pertinent not to anticipate any direction unless we get a portend move of some magnitude.
I have lot to share, but in nutshell, I would continue to focus on individual stocks who are giving a nice entry after a decent pullback.
Conclusion
The market is in near-record territory, with primary indicators flashing negative divergences. In a bull market such divergences are not usually a serious problem. They don’t say ‘sell’ as much as they say ‘not a good time to buy.’ The short-term problem with the VIX I mentioned tells us to really be on our toes until it clears. Background issues are market overvaluation; hence, be cautious.
I welcome any feedback you may have about the content of this article.
Be alert..!!; Be a Savvy Investor..!!
Pankaj Saini