Weekly Market Recap
It was quite a week for the market. The major indices continued to surge to a new all-time high in an ostentatious manner led by banking and IT stocks. Although IT stocks witnessed a sharp correction on Monday led by TCS after earnings declared last Friday, however, upbeat earnings from INFY and WIPRO led to a sharp recovery in all IT stocks later week except TCS that pushed the SENSEX and NIFTY to achieve a new milestone.
In the week gone by the benchmark SENSEX conquered the 61K mark after gaining whopping 1246 points, or 2.08% to reach 61305. And NIFTY ended beyond the 18K mark for the first time after added 443 points, or 2.48% to close at 18338. While BANKNIFTY outperformed significantly and gained over 4%.
Current Outlook
It is an unprecedented extra-bullish market that we are witnessing where each and every sector has rallied stupendously. As I mentioned last week, BANKNIFTY was at the edge of the breakout, after being laggard for a long period it now seems to have taken the front end and has given a breakout from its previous high. If the breakout is sustained, then I think it has the potential to rise significantly and precipitously from current levels, consequently, that will lead the indices further up.
Earnings season has just started, and the expectation is already quite high that is the time when we need to be extra cautious as a minor setback may lead to sharp reversal provided stocks have already gained vertically on the back of expected earnings. Like we saw a sharp pullback in TCS.
Tata group of stocks were in news recently for their radiant performance, however, I have observed and discussing the same with my clients for quite some time and was expecting the same outcome. Looks like the major move is over as most of them have demonstrated a climactic action that may invite a small correction followed by a range-bound condition.
Fundamentally, whether the valuations are justified or not would be cleared once the earnings are over. Technically, the upside momentum is quite strong after every pullback NIFTY is having gap opening persistently as we can in the chart below and remained over-bought for quite some time and market breadth is also strong as does in a strong bull market. It is hard to predict how long that vertical move may continue, but certainly, the risk of a sharp correction is rising with every move. Hence, the outlook still is in the favour of bulls, but caution is warranted.
Conclusion
Technically, the indicators, market breadth, VIX, and the momentum are showing a bullish setup which may pop further rise in indices. I think the best buying opportunity are lying in the sector which has recently given a breakout, like in banking, SBI has given a solid breakout with heavy volume where the exit level is quite close (this is not a recommendation or advice just sharing my thoughts). Hence, stock selection would be the key along with exit discipline.
Feedback, comments, suggestion, or questions are welcome in the below comment section or at [email protected].
Keep Exploring…; Be a Savvy Investor..!!
Pankaj