Weekly Market Recap
The year 2020 began with sluggishness followed by despair journey but had a vigorously happy ending. However, 2021 started-off with gung-ho and is being welcomed on a positive note. NIFT has achieved a new milestone of 14k mark on the first trading day and concluded the year 2020 with a whopping gain of 14% annually (calendar year).
In the week gone by the benchmark SENSEX gained 895 points, or 1.91% to conclude at 47868, similarly, NIFTY posted a solid gain of 269 points, or 1.96% to close at 14018. While BANKNIFTY rebound and outperformed with a gain of 2.71%.
Current Outlook
Last week, I concluded on a cautionary note for the indices where I mentioned my reason to be cautious (refer my last weekly note). At the same time, I gave the prevailing uptrend all due respect which can further escalate the prices to new level. As there are more than few stocks which have given the clear-cut breakout after having a long consolidation which tend to further fuel the rally to surprisingly higher level.
There is bifurcation when analysing the indices and group of individual stocks. Indices looks quite vulnerable to me while many individual stocks look quite strong with an ample upside potential. On the positive side, financials have again started to outperform after a sideways or small a pullback in past two weeks which will have direct impact on NIFTY as they have maximum weightage. IT is already on strong en-route and has the second highest weightage after financials. As long as these two sectors continue to demonstrate strength it is difficult to expect a serious pull back of some magnitude.
However, on the flip side the same two sectors appear vulnerable on the long-term monthly chart with more pronounced negative divergences among their prominent indicators that may result into serious downfall. Moreover, the major correction comes when it is least expected.
Provided bulls have tight grip on the market, I think the best-case scenario from here would-be tortured-progress means the stocks which are already on strong bull run may continue to hover side-ways with upside bias along with seldomly sharp pullbacks that makes ardour to own them and make a fresh entry. In addition, the stocks which haven’t performed so far but expected to move up may remain sluggish with few false breakouts attempts for some more time.
Hence, given the due respect to solid uptrend outlook for group of stocks remain positive at least for time being unless vulnerability on indices proven otherwise.
Conclusion
NIFTY may go through a corrective phase to relieve the tension of a near-vertical price advance. A sideways to corrective action is evident on the daily chart, but the rising angle of escalation suggest some amount of grief as part of the transition from a correction to a consolidation and new leg up there after. Hence, utmost patience is required.
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Be Patient…; Be a Savvy Investor..!!
Pankaj