Weekly Market Recap:
Amid choppiness, market added some gain with consolidation underneath, and at the same time weekly winning streak from last week continued to this week as well. The market remained volatile, but remained within a capped range and kept recovering from the lows, showing resilience which demonstrated continuing buoyant undercurrent.
The NIFTY50 ended the week with net weekly gains of 83.45 points, or .80 per cent and settled at 10564..05, similarly BSE SENSEX gained 222.93 points, or .65% before closed at 34415.58.
The market behaved ambiguously this week, at the time when major indices Nifty and Sensex gained this week, BANKNIFTY under perform the overall market significantly and ended the week with a loss of 256.75 points, or 1.02 per cent. However, IT index gained whopping 649.9 points, or 4.9 per cent.
Current Outlook:
As I have been writing and showing my concern over crude oil prices hitting 3 years overhead resistance, this week as expected it (crude oil) has managed to overcome that challenge and traded above that mark at $68.40. And crude oil carries the most weight in most commodity price indexes. That suggests to me that an energy led upside breakout in commodity price index would greatly increase the risk of higher inflation which is not good news for Indian equity market as we are a net importer of this commodity, that too when the trade deficit is already widening. Rising inflation might cause some nervousness among stock holders.
Technically, upside break out in crude oil from current level could become a cause to catch up the fire, which in turn will lead to effect with significant upside in prices.
After having a handsome gain in last 2 weeks, benchmark index Nifty, has hit the horizontal resistance line at 10600 as depicted in chart below. Moreover, weakness shown by BANKNIFTY on Friday, suggest me that it would not be easy for the NIFTY to cross that overhead resistance.
Hence I would like to wait patiently with some warrant of caution before deciding next course direction that market may take, however, in the meantime I would prepared myself with some shorting candidate based on relative weakness of individual stocks.
Conslusion:
I believe that we may remain in range bound market until, earning season is over. However, I am getting a sign of correction which may lead to some sort of pull back, I may be wrong, but if market fail to overcome the horizontal resistance as explained above, my conviction for correction would become stronger. Hence, we should be ready with selling discipline and never forget to keep a stop in place.
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Analyse the trend..!! Be a Savvy Investor..!!
Pankaj