Weekly Market Recap

In line with my expectation, the pullback on indices continued for a third week in a row, Nifty has fallen vertically from 11700 to 11200 in last eight working days and the last Friday was the only mild positive day during that period. In a week went by the benchmark SENSEX eroded 454 points, or 1.18% to close at 37882, and NIFTY shed 134 points, or 1.18% to settled at 11284.

Current Outlook

Now the question arises, Whether the correction is over or it’s a just pause in bigger downtrend?. Well, the answer is not simple, however odds are still in favour of later. Since, quite long time I have been writing that the market has been making new highs but breadth is fading or not supporting. This indicates that participation was being narrowing and only few large-cap stocks were doing most of the work. This was not a healthy circumstance and consequently we saw a vertical fall on NIFTY from 12000 to 11200, except one pause at 11500 for a week as can be seen in the chart below. Technically, on-daily chart mostly indicators had reached closer to the bottom of the their range, perhaps that would become a reason for a pause in correction on Friday. And, blue horizontal line in chart can act a support zone at least in short-term.  However, on weekly chart there is enough room for further decline in prices.

Fundamentally also picture is not looking great as hardly there are few stock which are being rewarded post their better than expected earnings, in contrast to being punished after slight miss on earnings. This indicates future earnings are not going to be better current quarter. Hence, it is more likely price pay continue to decline after a little pause that makes a outlook negative.

Conclusion

Both fundamentally and technically things are not looking good, moreover, despite, NIFTY has fallen enough from its peak there is no significant spike on VIX (volatility index) rather it is hovering at the lower end of the range i.e. 12.13, which is contrary to the ideal scenario. I am taking this very negative for the market as it indicates there is a huge room for the prices to come down by the time VIX reach to the high end of the range. Hence, be cautious.

I welcome any feedback or suggestion you may have about the content of this article.  

Stay Alert..!; Be a Savvy Investor..!!

Pankaj