Wish You All A Very Happy Diwali.
Weekly Market Recap
The market is fully celebrating the festival season while negating all the negativity and it is on fire.!! Both major indices have reached at their all-time highs in a dramatic and upheaval manner. Not only that its look like the celebration period is going to extend till the commencement of the new year.
In yet another best week gone by the benchmark SENSEX posted a whopping gain of 1743, or 4.15% to close at 43637. Similarly, NIFTY surged 516 points, or 41.9% settled at 12780. While BANKNIFTY continued its outperformance and gained 7%.
Current Outlook
In my last note, I mentioned that NIFTY may cross above the 13k mark given the technical configuration was until last week. In the after math of this week rally it appears that that target is not far away and is quite feasible to achieve in few sessions. The market is firing from all its cylinders as all the major sectors have contributed well to drive the indices at their all-time high. While BANKNIFTY is yet to reach its previous high although two heavy weight banking stocks KOTAK and HDFCBANK have made a new fresh high. Provided the congregation of banking stocks have maximum weightage in NIFTY they could further spur the indices to new summit. As I pointed out earlier few banking stocks are still providing descent entry and the entry would be sublimed after little correction.
Technically, NIFTY is expected to reach at somewhere 13200 level and now strong support is appears at 12k. The rally that took off from last support level at 11600 has lopsided gain of over 1000 points, however, in last three years chart suggest that NIFTY has always corrected post such a big run. Moreover, NIFTY has rallied unprecedented more than 5000 points from its low of 7500. This is the biggest rally we have witnessed ever in a decade in short span of time. As we can see below is the chart of 8 years of NIFTY. Therefore, little pullback or few days of consolidation is quite feasible after such a gigantic move. Nevertheless, market tends to stretch over-bought conditions to some extent by that means reaching to expected target is quite possible before correction. Hence, traders can hold their positions in NIFTY, but taking fresh position wouldn’t be prudent.
As far as individual stocks are concern, I would say few of them are still bestowing a nice entry for a big gain. In nutshell, the precipitous rally has discounted the sharp recovery in economy, ipso facto outcome is positive.
Conclusion
The minor sign of buying climactic exhaustion is visible that implies the current trend will most likely pause for a few days. We can also call it a blow off, which has the potential for a violent price reversal. At present market is in rhapsodic phase so my best guess is that after some kind of sideways is expected and later price will move higher soon, but as I always said we should be prepared with exit discipline if required.
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Keep gauging…!; Be a Savvy Investor..!!
Pankaj