Weekly Market Recap
The benchmark Indices Nifty and Sensex made new this week, exceeding the record set last week. Nifty spent the truncated week marking marginal highs and continued to consolidate at higher levels.
Sensex ended the week 303 points or .80% higher, settled at 38251. Nifty gained 86 points or .75%, ended at 11557. However, Banknifty underperformed the market and declined by 292 points on the back of correction in private banks, about which I wrote 2 weeks ago that private banks may lead in downtrend.
Current Outlook
Since last 2 weeks, I have been writing about negative divergence between price action and technical indicators and this formation remained intact this week in banknifty, eventually, it appeared to be resolving in downward. I sense that banknifty is in trouble in the near term, perhaps recent downtrend can continue. There are number of reason for my sense as we approach the expiry week.
While, the steady rise in Nifty and Sensex does not present a problem. There is, however, a problem persist in the form of a negative divergence which has not been resolved completely. Though, it is not a giant issue, but I will continue to be cautious. I think it is reasonable to expect a little pullback in Nifty and Sensex in response to banknifty as financials has a weightage of more than 30% in Nifty.
However, I am comfortable to buy other group of individual stocks on pull back which has beaten the expectations post earnings.
Conclusion
The Indices may see a short-term mild correction as they are modestly overbought and correction is not only required but desirable, but I think that is low probability. Hence, focus on individual stock would be nice reward to risk strategy.
I welcome any feedback you may have about the content of this article.
Happy Investing..!!; Be a Savvy Investor..!!
Pankaj Saini