Weekly Market Summary:
It’s been heck of seesaw between bulls and bears, bears and bulls. Since after a steeping angle of ascent, expected correction happened in an unexpected manner, investor sentiment took a hit in big–way in the wake of back-to-back adverse events that have sent the market into tailspin. First it was the introduction of LTCG and slippage of fiscal deficit in union budget, then global sell off and now the PNB scam – the bulls have gone off the winning course.
PNB fraud, of Rs11400, took a toll on Indian market that caused it worst performer among global peers, where global market rally rallied over 3-5% we were almost flat. PNB stock tanked almost 20% and other state lenders also felt the heat and headed-south.
On a weekly basis, the indices remained almost unchanged, with the SENSEX gaining merely 5 points, closed at 34010.76 and NIFTY losing 3 points, settled at 10452.3. Almost, all the sectors traded with flat to negative biased, no leadership came into existence.
Current Market Outlook:
With fear ramped up, current outlook seems to be like consolidation and capitulation. Stocks advanced in first half and then closed flat, which suggest market may need more time to find its bullish footing. Although VIX (volatility Index), a prominent indicator at this time, has cooled off from their highs this week and down 14.83% at 16.38, below danger mark of 20. However, market breadth (difference of advance and decline stocks) on a closing basis throughout the week was quite weak, which suggest internal weakness in the market is prevailing under the surface that may favor the bears.
If I compare today’s scenario with past few bear markets, they started with a VIX reading above the 16-17 level and never retreated beneath this level during the entire bear market. And it makes sense to me because fear generates the selling and resets everyone’s mentality to sell the rallies. This is why in a situation like this I like to take a step back and see what’s going on, on a large scale and wait to see the further downfall in VIX.
There are many possibilities to decide, what could be the next course of action for the market. Whether, the market will consolidate and spend more time before resuming the bull market, or it will be a V-shaped recovery, or fresh sell off will begun, etc… Preparing for those possibilities should be our next step and preserving cash during what could be back and forth action will be paramount.
Conclusion:
I am trying to look at what information markets are throwing at us, especially in a situation like this when sudden rebound and big swings can occur frequently. It’s easy to fall in the “focus-trap” and forget or fail to see the bigger picture. I would advice to sit back and take a view from above and do some assessment of the market before getting into any position and whatever position you take don’t forget to keep a tight stop in place.
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Trade well; trade with discipline! Be a Savvy Investor!!
Pankaj