Weekly Market Recap:
Nothing much has happened this week, since Monday until expiry day (Thursday) major benchmark indices crawled in negative territory with bearish sentiment despite of some recovery in global markets. However, on Friday, indices bounced off sharply and managed to recover its weekly lost ground and ended in green.
In the week gone by, BSE Sensex closed with a gain of 131.39 points, or .39% at 34142.15, similarly, NSE Nifty gained marginally 38.75 points or .37% before closing at 10491.05
Leadership came from IT and metal stocks, whereas, Auto and selected pharma stocks were continued to be on flip side, while banking stocks tried to stabilize post PNB fraud.
Current Outlook:
Last week, I wrote that in previous bear markets, VIX (volatility Index) never fell below 16. And now, the good news is VIX has dropped below 16, now at 14.20, which suggest that the meteoric fear or risk that we saw in last 3 weeks, seems to have dissipated at least in near term. Moreover, market breadth, but only on Friday, first day of new series post February F&O expiry, was quite strong, but need to be watchful in coming week.
Although, market this week bounced off from their nearly secondary test, earlier low (in first week of February) on Nifty was 10276, and this week it rebound from 10303, technically which is bullish at least for very short term. However, I remained cautious, because when I see the last 2 years of bull run, IT stocks had had negative divergence with the broader markets or major benchmark indices, that means until December when Sensex & Nifty were hitting new highs, IT stocks were lagging significantly, however, since January 2018, IT index/stocks has been rising persistently, perhaps on the back of fallen Rupee against US dollar or any other reason (earning perspective). But to me, fallen rupee indicates outflow of money from Indian market to elsewhere.
Even though, IT index/stocks are also rising with the same steep angle of ascent, of which I had already shown my cautioned view, a week before major market corrected. On the other hand, you will find buying advice on IT sector by all, so called fundamental or technical experts which appears on business channels like CNBC or ETNOW, etc. However, I think they can collapse later, if not sooner, hence be cautioned.
Conclusion:
I am concluding with the same note as I wrote last week that there are many possibilities for the market from here on, in short term market may bounce off sharply but the key challenge is whether the bounce would be sustainable or not, that remains a question. Frankly, that is pretty thin evidence, what can happen. At any rate, I think all will be resolved next week or coming weeks, hence always keep a tight stop in whatever positions you take or taken.
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Trade with patience & discipline!! Be a Savvy Investor!!
Pankaj