Weekly Market Recap
After a knee-jerk and roller-coaster ride last week, market tried to stabilize at higher level this week. There was an alternative days of gains and losses, however, NIFTY managed to post a descent gain. Even though there was a minor sign of loss of momentum at higher but holding on higher level reflects bulls are still in charge.
In the week gone by the benchmark SENSEX surged 702 points, or 1.76% to settle at 40685, similarly, NIFTY closed up with a gain of 167 points, or 1.43% at 11930. While BANKNIFTY which regained some strength last week and continued to do well with a rise of 4%.
Current Outlook
The salient feature this week was sector rotation, which appeared last week as well, it was more apparent this week. Few weeks ago, I mentioned about the vulnerability in FMCG stocks on long-term chart since then I had been watching them closely; and this week there was sharp fall in couple of leading stocks post missing earnings estimate that suggest a sign of money outflowing from this sector after having a stupendous performance for almost a decade. At the same time, there is a sign of next leg of rally in industrial stocks, which I also mentioned in my last note. There might be uncanny accuracy, but perhaps indicating a nice entry with quite favourable risk-reward ratio. And, this week these stocks were resilient, even though we witnessed a sharp correction on Wednesday, but FMCG remained weak and closed at the lower end of the range.
The sign of strength in industrial stocks is a good sign for the economy because of their widespread applications in most sectors of the economy, which I wouldn’t talk about much. Nevertheless, the implication from rising industrial or base metal stocks is positive for the economy. Moreover, few cement stocks recently made a new all-time high that commensurate and support the above condition.
Technically, I think the level of 11600 (green horizontal line on chart) on NIFTY is crucial which is 21-day EMA that coincide with gap down fall in February when cascading downfall occurred. Hence, it is axiomatic to consider that above conditions deputise the positive outlook, but we need to be sector and stock specific for the better return and safety.
Conclusion
Above evidence supporting the idea of being long in selected group of stocks where risk-reward is favourable. However, the market is quite volatile and fickle these days which is changing the direction quite often than ever before. Hence, we can only tackle this condition of the market by having strong exit discipline while taking an advantage of large move.
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Keep Analysing…; Be a Savvy Investor..!!
Pankaj