Weekly Market Recap

As expected, market remained volatile throughout the week on the back of interim union budget. On Monday, market opened on negative note and hovered near the lower range for next two days with slight up move, but with negative biased; however, major indices recovered sharply on Thursday that followed through on Friday (budget day). It was not unusual for the market to had wild swings in general on budget day, at one point of the time the Sensex was up by more than 500 points, eroded all the gains suddenly thereafter and again moved up, eventually closed in green. The rally was supported by IT stocks, further fuelled by FMCG and Auto stocks (specially 2-wheeler) on the back of announcement of full tax rebate for the income group of up to 5 lacs in budget speech that supposed to boost the consumption.

Amid high volatility, the benchmark Sensex managed to close the week with a gain of 443 points, or 1.23% at 36469. Similarly, Nifty ended with the gain of 113 points, or 1% at 10893, however, after a long time banking index was relatively weak this week and closed in red, Banknifty was down by 29 points.

Current Outlook

First and foremost, to me during earning season is to analyse how the stocks react on their earnings because that not only exhibit the fundamental situation, but also apprise about the internal strength or weakness of the overall market. Until last week, as I wrote in my last blog, majority of the stocks reacted negatively post their earnings, despite exhibiting increase in their profit. This week picture looked slightly better; apart from IT stocks two heavy weight banking stocks (also Nifty50 constituent) AXISBANK and ICICIBANK reacted positively post result; however, ICICIBANK given up their gain in next two days, though AXISBANK is holding on. Still, so far, percentage of stocks reacted positively after earnings is quite less compared to negative reaction and that tells me something which is pernicious for the market.

In addition to this, there was some technical transformation this week, until two weeks ago we saw a higher lows on Nifty that resulted in triangle formation as I have mentioned in last few blogs. Since, Nifty had a false breakout at above symmetrical triangle (refer to my last blog), Nifty has broken the series of higher lows and made a first lower low this week as depicted in chart below. Although this first lower low is in line with previous low and seems innocuous so far. It is pivotal to note that the precipitous rally in last two days halted precisely at the horizontal over-head resistance line (see chart below). So , we can see the transformation in technical pattern from triangle to rectangle, but remained in trading range.  

Hence, outlook is not clear yet and looks like the same as we had last week.

Conclusion

As I did neutralise my stance from being negative just before the earning season started off and became negative again last week, I would like to remain negative except for IT stocks unless I found veritable improvement in group of stocks along with their technical indicators that lies in my investing and trading model. Hence, if you are a buyer be cautious and be prepared for selling discipline if required.

I welcome any feedback, comment and question you may have about the content of this article.

Be focussed..!; Be a Savvy Investor..!!

Pankaj