Weekly Market Recap

This week, I was expecting the range bound scenario for the market (indices), however, on Thursday Nifty closed down below the last week’s low, further, on Friday price gapped down and plunged sharply, but that ended soon, thanks to the government meet that happened to be aftermarket hours on Friday. Eventually, market bounced-off sharply and closed at the lower end of the trading range of last week.

In the week gone by, the benchmark SENSEX closed down by 649 points, or 1.74% at 36701, and NIFTY lost 218 points, or 1.98%, settled at 10829. While, no major recovery is being seen in BANKNIFTY, which closed down by 1258 points, or 4.46% at 26958.

Current Outlook

The government made few announcement on Friday post market hours the important one for stock market point of view is rolled back the enhanced surcharge on foreign portfolio investors and domestic investor. I think, that move can arrest the downfall temporarily, on the other hand its shows, at least to me that prevailing macro conditions heading towards bigger weakness that can also be concluded by the way financial stocks are performing which is not a good news for the market. Financial (mostly private banks and NBFC’s) had been a heavy weightage sector until recently, even now private banks alone have a weightage of more than 30% in NIFTY, which has started to deteriorate, and I think that trend will continue for quite some time. In addition, financials are supposed to be back bone of any economy, that flourishes with the credit growth. The credit growth reflects the consumption demand or we can say, risk-off or risk-on among investor or consumer.

Technically, the dramatic move on Thursday and early Friday resulted in break below the last week support and the same support seems to have turned out to be resistance as even after bounced-off sharply NIFTY stopped precisely at the same level as depicted in the chart below. Hence, outlook appears to be deteriorating sharply.

Conclusion

The market is coming down after resolving a short-term oversold condition, and it may or will take several days to swing down to oversold conditions. Long-term indicators turned down this week, but still offer some hope that trading range will hold. I think, the weekly chart configuration is forecasting lower prices ahead.

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Pankaj