Weekly Market Recap:
Wow!! What a stellar ride auto stocks has driven, especially Maruti, stock had surged 850 points in a week before closing at 9700, according to media reports Maruti Suzuki has become the world’s most expensive one in terms of price to earnings 30.6(P/E) multiple, overtaking Italian sports car maker Ferrari.
On Monday, at the opening both headline indices Sensex and Nifty plunged over 800 and 250 points respectively for a while, when congress marched ahead of BJP in Gujarat elections vote count, thus scaring the hell out of investors, however, both indices recovered sharply in a short while and rallied until end of the week to scaled up to new high. On Friday, BSE Sensex closed at record closing peak at 33940 after gained 477 points in the week gone by, similarly, NSE Nifty closed at 10493 gained 159.75 points.
Auto’s, financials, IT and capital good did very well, while pharma and FMCG appeared to be sluggish in trade.
Current Outlook:
Let me begun by seeing the volatility index (VIX), which is down by 22.44% at 11.59, that indicates market is in complacency zone and that’s great news for the bulls. Today, first time I am writing my views about particular stock that is contrarian to so called equity experts appeared on business channel like CNBC or ETnow and prevailing sentiments and the stock is also the attraction of the week i.e Maruti. Since I missed such a powerful rally like once in a lifetime kind of opportunity, I had been awaiting this kind of buying climax coincide with climactic volume as it is depicted in the chart below. I think for a time being stock has made a high which is difficult to cross over in a near term unless superb sales figure or quarterly results compels to do so and on Friday around 9850 was the shorting opportunity for a potential downside target up to rising 20 day moving average or horizontal support line and will consolidate for quite some time, perhaps to get fueled to rally further.
However, broader market including benchmark indices are looking quite strong and is well placed to surge further; I think next leg of rally would be steep and fast before we reach to a buying climax. Hence action here is very bullish indeed for the performance of Indian equities into year end and into 2018.
Disclosure: I have a short position in maruti at 9850 with a tight stop at 10050.
Conclusion:
I think we’re headed for an important top soon — not necessarily the top, but something that will stand out when compared with the tiny speed bumps we have experienced this year. Next week is a placeholder between Christmas and New Year, and market action will probably be unremarkable. Maybe things will get more interesting when we come back to work in 2018.
Have a great Christmas!
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Be a trend follower…. Be savvy investor..!!
Pankaj