Weekly Market Recap
Finally, major indices broke the seven weeks of losing streak and bounced-off sharply as expected from the low end of the range towards the higher end of the range, in fact closed slightly above the high level attained in the previous week.
In the week gone by, the benchmark SENSEX surged whopping 3568 points, or 12.93% settled at 31159, similarly, NIFTY relished the gain of 1028 points, or 12.72% closed at 9111.
Current Outlook
The effervescent rally is sustainable or not only time will tell us, but closing above the previous high is ostensibly favoring the bulls (see the chart below) and that has developed an enough scope to rally further.
It is important to note that market rally sharply specially at two occasions. First, when it is at the last leg of bull run, we may call it a euphoria like we saw since September 2019 till early January, and second when it is in the early stage of bear market. First bounce in bear market rally are supposed to be quite sharp and embezzled to trap the investors. It is quite possible that bear market rally may recoup the 60% of the losses post the cascading fall, especially when it is fueled by stimulus package provided by the central bankers across the globe. So, at this juncture, unequivocally, we cannot rule out the precipitous rally fueled by extreme liquidity in conjunction with short covering for next few days. However, that rally could be fragile. Hence, it is axiomatic that the investor or trader should seek to minimize his risks while taking long or short positions in the market.
Ideally, I think, as if I was expecting NIFTY should continue to oscillate between the wide range of 1500 points established in last two-week sessions, although I am not negating the ability to rise further on the back of short covering. Hence, outlook appears to be a bit ambiguous.
Conclusion
There are myriad of possibilities like continue to rally till the time shorts are drawn out of the system completely or make a double or triple bottom while consolidating for quite some time in a wide range. However, fundamentals were weakening quite before the pandemic hit, and I can prognosticate the fundamentals would not be the same as it was before the covid-19 once we through this crisis and may take years to retain the same growth of trajectory. Ipso facto, caution is warranted.
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Be Safe…!; Be a Savvy Investor..!!
Pankaj