Weekly Market Recap
After a sharp bounce and tantalizing rally last week, the upside momentum appears to be losing as a result markets hovered side-ways throughout this week very much in line with my expectation.
In the week gone by the benchmark SENSEX closed up with marginal gain of 115 points, or .28% at 41257, similarly, NIFTY posted a gain of merely 15 points, or .12% settled at 12113, whereas, BANKNIFTY underperformed significantly and lost 367 points, or 1.18%.
Current Outlook
I did clearly enunciate the probable forthcoming movements by the market in my last blog that indices may oscillate between last week’s high and low. As expected, this week NIFTY continued to hovered side-ways at or above the higher end of the last week’s range as depicted in the chart below.
Though, this week indices closed on flat note, but the deterioration in market breadth was quite apparent and was more pronounced than before throughout the week. Most importantly, the significant underperformance by the banking stocks is not a good signal for myriad of reasons. It is quite indispensable to take a note of that. The statistic and correlation between NIFTY and BANKNIFTY tell a lot. Since last few years BANKNIFTY has acted as a leading indicator for either side. Specially, since January 2018 we have seen three major sharp corrections in the market, all were led by banking stocks. Typically, these corrections happened after a fair degree of outperformance by the banking stocks.
Provided, financial stocks have a maximum weightage in NIFTY, downplaying by them would not be propitious and may lead to pull back in the market. Hence, outlook appeared to be cautiously negative at least in short-term.
Conclusion
The loss in momentum is itself a major indication and warning. The last week sharp pull back may be a major sign of change of character from long-term bullish to bearish conditions. I think analyzing the market for few more days would be prudent before we rush to get in or out of the market, however, buyer needs to be ready with the selling discipline or stop loss.
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Pankaj