Weekly Market Recap

Market this week rallied stupendously, totally opposite to my expectation; no doubt it is quite disappointing to miss that kind of stellar run. The rally was mostly driven by heavy weight financials. This resulted in Banknifty to made a new all time high.

In a week, the benchmark Sensex gained 1352 points, or 3.7% to settle above 38K mark at 38024. Similarly, Nifty added 391 points, or 3.55% before stopped at 11426, while Banknifty outperform the headline indices and gained 1619 points, or 5.83% to close at new all-time high at 29381.

Current Outlook

The recent rally has marked change the performance of the market, specially financials. Typically, financials are considered to be aggressive and growth sector and the past week saw more focussed move to that  sector followed by infra stocks. And, the perking up of correlation between financials and infra making me a little more inquisitive. One sector that is underperforming the market in line with my expectation are FMCG stocks. Despite, having good run by the market on Friday FMCG stocks were down by 2-4%. Ideally, underperformance by defensive sector is normally bullish in nature for the market, however, since last few years FMCG stocks has outperformed the market significantly.

I did some research and found that in bull run since 2001 to 2008, the defensive sector like FMCG had underperformed the market quite substantially, whereas stocks belonged to infra and corporate oriented financials moved up incisively. Could it be a repeat of same theme?. Well, only time will tell, but provided the exuberance in juxtaposition of delineation on the charts suggest me to think about this combination once again.

However, market breadth remains an issue, in spite of, market had a stellar run this week, breadth continue to be weak and not commensurate in line with the direction of the market that suggest caution is always warranted. Hence, outlook this week changed drastically from negative to strongly positive but with caution.

Conclusion

Although, the bulls seems to be totally in control, even after this rally both indices Sensex and Nifty has gone nowhere in last one year except some gain by Banknifty. Despite a choppy road to nowhere, the bulk of evidence is turning bullish, long-term weekly chart has more room to move up, however, technical indicators are suggesting over bought condition in short term. Hence, It would not be a bad idea to wait for resolving in overbought condition before go long aggressively.

I welcome any feedback or suggestion you may have about the content of this article.   

Keep Exploring..!; Ba a Savvy Investor..!!

Pankaj