Weekly Market Recap
The market continued to rally in the fourth week after the pause last week, in fact, the advance became incisive as the week progressed to close at the highest point since the rally began in the last week of March. It has been the broad-based rally majorly driven by banking stocks.
In the week gone by the benchmark SENSEX climbed 1457 points, or 2.44% to cross above the 61K mark, similarly, NIFTY passed above the 18K mark with a gain of 440 points, or 2.5%. BANKNIFTY is leading the advance with a gain of 2.65% and is about to reach a previous all-time high level.
Current Outlook
In my last note, I wrote that despite everything that has been thrown in like; high inflation, rate-hike, recession fear, and earning fear; and yet here the indices are, bulls manage to escalate the prices higher and kept there. And provided ability of bulls to keep the prices higher infers that we should consider buying the strong candidate at the support level. I think, in the last penultimate week when IT stocks were punished on the back of weak forthcoming guidance the NIFTY bestowed a decent buying entry in the pullback at the top-end of the channel enunciated by the green arrow. The break-out zone should act as a key support area, with many individual stocks exhibiting a similar pattern.
Ideally, the heavy selling on negative news such as the previous week tends to shake out the weaker hand, which can often pave the way for a sustained rally afterward – if market conditions are ripe. The majority of stocks were able to find support, led by gains in banking stocks which reported better earnings. Stocks in other areas also drove the markets higher on Thursday and Friday after posting strong quarterly results, while also guiding growth higher for the year.
The broad-based rally later in the week not only pushed the NIFTY back into an uptrend, but it helped improve breadth enough to inject some fuel into the markets. Next week will be crucial to watch out for as the VIX has reached the lowest level of the decade, as I mentioned which may remain lower for quite some time, but still caution is warranted.
Conclusion
Everything appears to be in the favor of bulls except quite low VIX. Moreover, the NIFTY gained feverishly in the last hour on Friday indicating the initiation of buying climax, hence we should hold the long positions with tight stops instead of adding new positions.
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Be Patient; Be a Savvy Investor..!!
Pankaj