MARKET PULSE:
Status: Confirmed Uptrend
Highlights:
One up and four down days
Weekly Market Review:
Bears finally managed to break the eight-week winning streak of India’s benchmark indices, helped by a budget that left investors disappointed. The return of long-term capital gains tax on equity didn’t go down well with market participants.
While both the key indices touched all-time highs in Monday’s session, the next four sessions were brutal to say the least. It turned out to be the worst week in almost six months, as the Nifty and Sensex plunged 2.8% and 2.7%, respectively.
With valuations at peak levels, all the Indian market needed was a reason to go down. With the government failing to meet its fiscal deficit target and also burdening investors with LTCG tax, market sentiment was bound to take a hit. Weakness in the U.S. market further dampened investor sentiment.
If the fall in key indices was a sell-off, it was nothing short of bloodbath in the broader indices. Nifty Midcap and Smallcap indices took a massive beating, as they dived 7.9% and 10.6%. The drop in these indices was even worse than the one witnessed during the February 2016 correction.
With market bears gaining upper hand, all the sector indices got severely punished this week. The top losing sectors were Nifty Realty (-8.3%), Nifty Pharma (-7%), and Nifty PSU Bank (-7%).
MarketSmith India’s IND 47 index, our proprietary list of top 47 stocks in chart and fundamental characteristics, tumbled 10% this week.
Talking about market direction, the fall in key indices this week now means they are around 3.8% off their all-time highs. However, the whole week saw just one distribution daygetting added to the distribution count. In view of a low distribution count and a not-so-high overhead resistance, the market status remains unchanged at Confirmed Uptrend.
However, investors should proceed ahead with caution due to weakness in broader markets. The Nifty Midcap and Smallcap indices have corrected a staggering 9.5% and 14.6% from their all-time highs, respectively.
During the coming week, the following events could serve as market movers:
Nikkei Services PMI: February 5, 2018
RBI Interest Rate Decision: February 7, 2018
Current Outlook:
– Market showing divergence; key indices in uptrend while midcap and smallcap indices in downtrend.
– Stay disciplined and exercise sound sell rules.
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