Weekly Market Recap:
Markets continued to enjoy its best days of 2018 last week, and I have been accustomed to write about the new highs week after week, and this week was no distinct in achieving new-milestone amid corporate earnings.
The week gone by ended on a strong note, benchmark index, Sensex closed at record high at 36050.44 after gaining whooping 538.86 points, similarly, Nifty50 added 174.95 points, before closed at new high at 11069.65. Leadership came from IT, metals and financials while telecom and auto’s appeared to be on flipside.
Index constituents like Asian paints, Maruti, Axis bank, Dr Reddy and Indiabulls housing have announced their mixed set of third quarter earnings, while companies like HDFC, LT, Vedanta, ICICIBANK are set to declare their earnings in coming week.
Current Outlook:
It is quite strange to see both benchmark Indices and VIX (volatility index) at their highs, as both are contrarian to each other; in general it is not possible to see the Nity50 or Sensex at their highs along with an year high of VIX which is up 25.21% at 17.51, however, it is because of upcoming major event – the union budget- slated to be presented on 1st February and combined with ongoing corporate earnings leads to infuse volatility in the market.
As I wrote in my previous blog that steepening angle of ascent of indices makes me cautious on sustainability of this kind of unprecedented rally and suggest that this could be the final one before we see the substantial pullback or consolidation, however, when I see the US market, I found that their markets angle of ascent is persistently quite steep since October (you also check) and still rising. Moreover, relative rotation among the sectors in our market is evident, which indicates money is only changing hands, not willing to exit, and stocks has the ability to stretch in unusual time market conditions and I would say this is one of those times.
Hence, I am quite sanguine in my belief that few stocks (technically and fundamentally strong) have a long way to go before they enter in corrective mode.
Conclusion:
I think overall market still looks healthy albeit overbought. However, some caution is warranted given the steep rise in price action along with overbought technical indicators. I would advice to be a stock specific and find a nice entry in a stock with minor pullback that remains in long term uptrend. Last but not the least, keep light position with tight stop until –union budget- is announced and understood properly.
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Enjoy the rally..!! Be a Savvy Investor..!!
pankaj