Nifty Weekly – While market reacted like end of the world was near, as if this is Mar ’20 all over again, the long term charts suggests nothing abnormal. This is a routine pullback as we have seen several times before. Currently at 20 WMA support, and also re-testing previous tops made in Apr, Aug and Sept and very oversold on the hourly charts, making a bounceback likely next week.
What was peculiar also was the lack of liquidity. This is not the first time either since same thing happened between 13-20th December last year when Nifty fell from 17639 to 16410 (~7% fall). However market recouped all losses and liquidity was back post Christmas starting the strong pre-budget rally.
Considering we are at strong support levels and oversold, it is likely that a bounceback is probably around the corner. Most of this noise will not even be visible in monthly/quarterly charts and they are better guide to someone with slightly longer horizon. Even the midcap/smallcap charts that have broken 20/50 DMAs can look very different when viewed on monthly charts.
Last couple of months have been mental in terms of runup. There was a new sector in fancy every single week – PSU, railways, fertilizers, sugar etc. I think faith in this sort of random runups will be low which augurs well for overall market health. When money making looks very easy, it seizes to be. This time I expect the market to be a bit more discerning and show some respect to earnings, fundamental strengths and most importantly valuations (interest rates are up and expected to stay up, so we must be cognisant of the valuations a lot more for fresh buys).
The above is the reality of Covid cases in India and yet the only stocks in the green or flat today were pharma, healthcare, oxygen cylinders (seriously?), diagnostics making it look like Covid is well and truly back. What caused Mar ’20 crash was uncertainty around a new beast. This isn’t a new beast anymore and lightning doesn’t strike the same tree twice. We have learnt enough lessons and I doubt if there are going to be crippling lockdowns and so on.
Disc: I am personally staying put. My portfolio made an ATH on tuesday and is down 8% from top (5% down just today). I expect more volatility ahead both ways but see no reason to sell out of fundamentally strong positions yet.
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