Weekly Market Recap
It looks like a lot has happened this week, however, nothing has happened on indices on a weekly basis. In continuation of sideways movement both NIFTY and SENSEX remained oscillated in a limited band this week, except for one day big downside move on Friday when NIFTY plunged 135 points after the Union Budget speech. Perhaps, market is unhappy with the Union Budget this time.
In the week gone by, the SENSEX managed to close above 118 points, or .30% at 39513, Similarly, NIFTY closed in green by gaining 22 points, or .19% at 11811, whereas BANKNIFTY continued to outperform with a gain of 370 points, or 1.19%.
Current Outlook
In my last weekly blog, I wrote that I was not expecting much from this Union Budget as far as stock market is concerned and overhyped event could prove to be a non-event. In line with my expectation, the Budget was more or less the same, except some negative surprise for super rich class as they will be taxed more. In addition, I also recommended buying selected PSU banks and most of them have given positive closing on weekly basis, even they were in green in the after-math of Friday decline.
Well, the decline we witnessed on Friday was substantive that looks like an initiation of impending correction. As I wrote my first line ‘it looks like a lot has happened’ ; in fact a lot has happened beneath the surface, why beneath the surface, because there no significant change on indices. Few heavy weight large cap stocks seems to have changed or stopped the uptrend. Its not a good news. Weekly gain on indices was being maintained by very few heavy weights financial stocks. Ideally, Indices relying on very few stocks is not good, but that doesn’t mean they can also fall in near future, this situation can be over-extended for quite some time. Ultimately that situation will invite severe correction as they will be over-valued and as per the market capitalization methodology their weightage will continue to gain, consequently any small correction in these stocks will lead to deeper correction on indices.
Q1 Earning season is going to be start next week, let see whether the market deserve such a high valuation or not. I believe there is less probability for a positive surprise on earnings. Hence, positive outlook seems to be in question mark.
Conclusion
Short-term indicators are turning down, long-term indicators has already been facing negative divergence for quite some and few large cap stocks seems poised to fall, so I am looking for at least a short-correction in coming weeks. Additionally, the fundamental backdrop is negative with market over-valued, but that will be cleared very soon post earnings. As I said, earlier, if the earnings will not improve it will be very bad for the market.
I welcome any feedback or suggestion you may have about the content of this article.
Identify the Trend..!; Be a SAVVY Investor..!!
Pankaj