Sign of Reversal or Just a Pause…??
Weekly Market Recap
Finally, NIFTY broke the seven-week winning streak this week, the blow-off kind of rally which started off at 9000 level once paused at 10250 and now at 11300, had a remarkable vertical run since then. Though, the loss in NIFTY was contained only up to 1% but the financials have demonstrated the serious problem that is explained in below section.
In the week gone by the benchmark SENSEX lost 522 points, or 1.37% to close at 37606, similarly, NIFTY closed down by 120 points, or 1.08% at 11073. While BANKNIFTY was down over 4% was the real culprit that dragged down the overall market.
Current Outlook
I mentioned in my last note that financials have demonstrated a serious problem, as on last week Friday the correction was being witnessed among all the major stocks consequently that may preclude the NIFTY to advance further. This week, my suspicious turned into reality as precisely the same configuration occurred. At a time when technology continued to evince strength, financials weigh down the over-all market. The congregation of financial stocks still have the maximum weightage on NIFTY, they not only can act as an impediment but may also exert the major indices lower. In addition, technology which has, so far, posted a marvellous rally might pause for some time on the back of profit taking, eventually that will put extra pressure on major indices. Moreover, RELIANCE which has entered into a phase where no target is difficult to achieve, is quite far away from its 50 and 200 SMA, technically that needs to be resolved either by consolidating at higher level or some sort of pull back, if the later happens then its resonance would be more pronounced on NIFTY due to its maximum weightage.
Though, one-week mild correction on major indices shouldn’t be considered as a sign of reversal rather it’s a healthy sign, however, provided the angle of escalation is quite steep which has always been a sign of worry for a sudden and shaper pull back.
As I wrote last week, the sharp rise in gold price is giving a perplexed and devious picture about the world economy which needs to be addressed carefully. Perhaps, that rally is being fuelled up by the exuberance of liquidity provided by the central bankers across the globe. However, the financials which are supposed to be the back of the economy are no longer attracting the easy money likewise in past which is a sign of worry.
In a highly dynamic and an exceptionally abnormal environment I will not shy to change my outlook quite frequently as one large move has a potential to make or break your fortune. Hence, outlook doesn’t seem to quite positive, in fact slightly negative.
Conclusion
Though, this week stop might have triggered in few of the individual stocks except in technology and metals, but this still be a good idea to be a stock specific. We need to find the best-performing stock from a relatively stronger sector with a closest exit. That’s a key.
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Plan your trade…! Be a Savvy Investor…!!
Pankaj