Weekly Market Recap
Last week, I wrote about the possibility of having simple or complex correction and concluded that it is most likely we are going to have complex correction means tantalising sharp rallies will keep coming to entice the retail investor so that big investors or institutional investors may exit at optimum higher level as unloading the large number of shares is not an easy task. And market this week precisely pan out in line with my analysis, when week began with mild correction followed by sharp rally which eventually turned out into cascading fall.
In the week gone by the benchmark SENSEX lost 1789 points, or 3.52% to settle at 49099, similarly, NIFTY eroded 452 points, or 3.02% to close at 14529. BANKNIFTY also shed 2.9% in line with major indices.
Current Outlook
Since past three weeks, I have been talking about the on-going or impending correction before it actually started based on my technical analysis, refer my blog dated 14-feb click here Indices Held up the Gain Amid Volatility (savvycapital.co.in). Though, the magnitude of fall sometime is difficult to anticipate but it was quite apparent on the chart that correction is likely to happen. Technical indicators and price action were having divergences that negative correlation ideally resolves with downfall. Provided NIFTY had a big precipitous up move for quite long so it was obvious the correction would be deep, and it came with good sign of warning.
Every bull market cycle has its set of big, winning stocks – companies with strong fundamentals and increasing mutual fund sponsorship which helps propel these select stocks higher for huge gains. These leading names don’t go up forever however, and it’s important to know when to sell your stock – either to take profits or to keep your losses to a minimum and last week I clearly mention it is prudent to book profit and wait patiently before you rush in to buy again.
There may be a rotation away from the industry group or sector that your stock is a part of. Currently, we’re seeing a sharp rotation away from few of leading sectors like Technology and FMCG into “recovery” stocks like metals and realty. Broader market bias will also have a hand in whether you should ditch your stock and wait for better times, and it’s important to have a strong idea of where the market’s area of support is and whether it’s been broken. At present, NIFTY is looking vulnerable and seems set for deeper correction. However, not all the news is negative out there, there are group of recovery stocks currently in strong uptrend and have been quite resilient in this downfall. Hence, it is important to see whether they continue to hold on their strength or fall in line with NIFTY. Ipso facto, outlook is vulnerable for NIFTY but cautiously positive for group of individual stocks.
Conclusion
Though NIFTY has corrected significantly from its high, but on long term chart there is enough room for further correction. Buyers should wait patiently as correction like this is likely to break major support which lie quite far from current level. Let the market settled, meanwhile keep analysing, market will provide the best entry.
Feedback, comments, suggestion or questions are welcome at below comment section or at [email protected].
Be Patient…; Be a Savvy Investor..!!
Pankaj