Weekly Market Recap
The bulls are getting buoyant not only taking prices higher but making advance sharper in the second week of the new year. Both SENSEX and NIFTY have posted tenth weekly consecutive gain which is the longest winning streak in past five years. Perhaps, this has been the fastest and powerful recovery ever occurred in the history of the stock market, persistently rising week after week.
In the week gone by the SENSEX further gained 913 points, or 1.91% to reach at 48782, and NIFTY slightly out gained the SENSEX and added 328 points, or 2.35% to settle at 14347. While BANKNIFTY yet to reach it previous high but rising effervescently and gained 2.75%.
Current Outlook
Although, the advance has been quite vertical since the low made in March 2020, however, the angle of ascent on NIFTY is quite steep from the level 11500. I have always been cautious about such a steep advance, especially if it comes without consolidation or sideways action, yet we cannot rule out that market may not rise vertically. Apart from fundamentals, greed and fear are the two substantial components that drive the markets if fundamental takes the price higher or lower sentiments (greed and fear) takes it to extreme.
Whether this vertical rally will sustain or not only time will tell, but I think retail participation is still not extremely high which is prerequisite for serious correction, fear is still there. Unless greed takes over the fear completely it seems difficult for any serious pull back.
At this juncture, my investment or trading model doesn’t allow me to get into the NIFTY or any stock which have gained precipitously, since as I have mentioned in the past there are more than few stocks which have given the solid breakout after the long period of consolidation, they are expected to move higher for quite some time. In addition, VIX is still far from a major turn-around level, suggesting lack of complacency which favours the bulls.
Unequivocally, few indicators are suggesting over-bought condition in the market ideally, they should relieve by small pull back or sideways action, but in a powerful bull run these conditions may remain the same for extended period of time. Hence, outlook continued to be in favour of bulls.
Conclusion
Prices are determined by the attitude of market participants and these attitudes move in trends, and once a trend gets underway it tends to perpetuate. Presently, the trend is strongly up so we can reasonably assume that that trend will continue. Provided it appears to be overstretched, hence caution is warranted.
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Be disciplined…; Be a Savvy Investor..!!
Pankaj