Nifty, -7.3%; Sensex, -6.9%; Nifty Midcap, -7.2%; Nifty Smallcap, -7.7%; and Model Portfolio, -6.2%.
Market Pulse Downtrend
Weekly Market Review
Nifty declined 7.3% during the week due to fears of widespread coronavirus. This is the highest weekly decline since the 2008-09 global financial crisis. Currently, it is trading below its major key moving averages, 200-DMA (-3.9%), 100-DMA (-6.2%), and 50-DMA (-7.3%). Nifty Midcap (-7.2%) and Smallcap (-7.7%) indices also showed weakness. India VIX surged around 30% today.
All the sectoral indices declined during the week. Nifty Metal (-14.5%), Auto (-10.3%), Media (-10.6%), and PSU Bank (-10.2%) declined over 10%. Remaining indices declined over 5% with FMCG (-4.3%) declining the least. Due to heavy declines, all the sectoral indices breached their 50-DMA. Barring Financial Services and Realty, all the sectors are trading below their 200-DMA.
We have downgraded the market to a Downtrend, implying minimizing exposure toward the market. We recommend investors to trim positions, raising cash if possible, or keeping a defensive approach by holding stocks that are resilient in a falling market. Investors should consider booking profits in stocks that have performed well and have advanced 20-25% from their ideal buy points. Even if the market undergoes a small correction, these stocks are likely to fall more. Further, stocks slipping below their respective 50- and 200-DMA on above average volume should be sold. Consider exiting stocks that have declined 8% from your buy price.
Looking forward, we will shift the market to a Rally Attempt if Nifty establishes a bottom and stays above its recent low for three straight sessions. From there, we would prefer to see a follow-through day before shifting the market back to a Confirmed Uptrend. Should this occur, the focus will be on ideas that show the best relative strength with good accumulation. The stocks that recover swiftly tend to lead the next run. Investors should maintain a watch list of attractive growth stocks and wait for the market to show signs of a Rally Attempt.
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