Weekly Market Recap
Indices had their first gain in three weeks and recouped half of the previous week’s big losses. Most beaten-down stocks technology and financials contributed the most followed by autos and FMCG. While cement and metals continued to hover at lower levels including heavyweight Reliance.
In the week gone by the benchmark SENSEX rose 1367 points, or 2.66% to 52727, similarly, NIFTY gained 405 points, or 2.65% to close at 15699. And BANKNIFTY also performed in line with major indices with a gain of 2.7%.
Current Outlook
The most eye-popping event that occurred this week was a significant change in market breadth. The breadth which had been persistently weak for quite a few weeks has turned positive throughout this week. However, this change came after prolonged negative readings that make it obvious for a sharp rebound. Therefore, any rebound still has to be viewed as a bear market bounce.
As I mentioned last week the indicators on daily charts have reached lower levels that might invite a rebound of some magnitude. In addition, it hasn’t been uncommon for the NIFTY to rebound sharply from the lower level since the correction began in October last year as enunciated by the blue lines in the chart. However, the last bounce was succinct in contrast to the two previous bounces which has resulted in a break below the horizontal support green line. Now the lost support may act as a resistance and rising above that level may further fuel the rally to some extent which is quite likely on coming Monday.
Unequivocally, the rally after oversold reading might be proceleusmatic and tantalizing but we need to scout for veritable evidence in order to flinch from embezzlement. I am not saying prices will further decline but the probability is always there as the configuration on the weekly chart is painting a different picture that still favors the bears. And, I think at least something more has to be done before we call a vicissitude in the existing downtrend.
Conclusion
It is an arduous task to find the bottom in the market and NIFTY has corrected almost 20% from its peak which infers that any low could be the cardinal bottom. Whereas the rally in a bear market has always been quite fascinating but the sustainability of this bounce is still in doubt. Ipso facto, we need to analyze every movement with utmost nuances.
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Be Patient; Be a Savvy Investor..!!
Pankaj