Current Market Status
A majority of the Nifty 50 companies have reported their september quarter earnings. A healthy double-digit average growth has been posted, hinting at a revival. The relatively benign movement of Crude Oil prices and the Rupee also contributed to the Nifty sustaining the 10650 level during week ended Novemeber 16. The Nifty and the Sensex were up 0.92% and 0.85%, respectively. Nifty Midcap and Smallcap on the contrary fell 0.55% and 1.23%. According to MarketSmith India’s methodology, at the end of the week, Nifty Reality, Bank, Financial Services, Energy, and Auto are in a Confirmed Uptrend, whereas Pharma, IT, Metal, and FMCG are in a Rally Attempt. For the week, Nifty PSU Bank (+2.5%) and Nifty Financial services (+2.4%) were among top gainers whereas Nifty Pharma (-3.6%) and Nifty Metal (-2.3%) were the top losers. The YTD returns for the Nifty and the Sensex are 1.7% and 3.8%, respectively.
Looking ahead, what’s in store?
On November 2, we changed the market status to a Confirmed Uptrend. Since then, market has been able to sustain this status. Private banks supported the Nifty Bank after PSUs took a breather to remain flat this week. During the week ended November 16, we saw good action in Eicher Motors, ICICI Bank, and Havells India. On Friday, the Nifty ended ~0.7% below its 200-DMA and on Monday it broke out of the 200-DMA line with above-average volume. This is a positive sign, but for the coming week, we need to closely watch whether the Nifty is able to sustain the 200-DMA level. Next key support level to watch out for is 10,490.
What can investors do?
Earnings revival and relatively benign movement of Crude Oil prices and the Rupee have sustained investors’ confidence this week. The market should be watched for additional follow-through days with good intra day gains on strong volumes. These follow-through days will validate market’s strength and will be the points where exposure can be increased. Investors are advised to look for fundamentally strong stocks trading above their 50- and 200-DMA, and are about to break out on higher volume, to add to their portfolios. Some good quality stocks include Havells India, VIP industries, HDFC Bank, and Hindalco Industries. On the other hand, technically weak stocks which are unable to sustain above 200- or 50-DMA should be avoided.
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