Current Market Status
The month of December started with a weak performance in the market. The Nifty and the Sensex lost 1.7% and 1.4%, respectively, during the week. Except Nifty IT (+0.2%), all other indices gave negative returns for the week. Nifty Pharma (-6.4%) and Auto (-4.3%) were the worst performers. The Nifty Midcap and Smallcap have also faced the wrath of selling pressure as they both lost 2.6% during the week.
According to MarketSmith India’s methodology, at the end of the week, Nifty Bank, Financial Services, IT, Energy, FMCG, and Auto are in a Confirmed Uptrend. Metal is in a Downtrend whereas Realty and Pharma are in a Rally Attempt. The YTD returns for the Nifty and the Sensex were 1.5% and 4.7%, respectively.
Looking ahead, what’s in store?
During the week, the Nifty lost its key support of 200-DMA and ended 0.5% below it, having re-claimed it during the last week of November. However, it is trading 1.1% above its 50-DMA. The Nifty breaching its support at the 200-DMA line will translate into market losing momentum. During the week, the Sensex witnessed two distribution days, taking the count to four, whereas the Nifty had one distribution day, taking the count to three. An accumulation of further distribution days on the bourses indicates overall weakness in the market. The state election results, which will be out on December 11, will play a crucial role in the market’s action.
What can investors do?
With markets losing momentum, investors are advised to look for fundamentally strong stocks from leading sectors trading above their 50- and 200-DMAs. Such stocks can be added once they break out with strong price-volume actions. Some good quality stocks are Colgate Palmolive, Titan, and Hindustan Unilever. On the other hand, technically weak stocks which are unable to sustain above 200- or 50-DMA should be avoided.
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