Weekly Big Picture : Corporate Tax Cut Announcement Drives Market Rally; Nifty Moved to Confirmed Uptrend

Market Pulse

Confirmed Uptrend

Weekly Action

Nifty, +1.8%; Sensex, +1.7%; Nifty Midcap, +2.3%; Nifty Smallcap, +0.4%; and Model Portfolio,+4.7%.

Weekly Market Review

Nifty, after closing on a high note last week, closed lower on Monday tracking weak cues from global markets and followed the losing streak on Tuesday and breached its 21-DMA. On Wednesday, the index traded in a narrow range but closed marginally higher. The sluggish momentum carried through Thursday and fell more than 1%. However, Friday turned out to be an eventful day with Nifty rallying more than 5% amid a positive announcement by the finance minister about a reduction in corporate tax rate to 22% from 30% earlier.

On the sectoral front, Nifty FMCG (+4.4%) was the top gainer, followed by Nifty Auto (+3.3%), Metal (+3.7%), and Bank (+3.1%). On the flipside, Nifty Media (-3.7%) was the top decliner followed by Nifty IT (-1.5%).

Today, Nifty had a follow-through day after it was up more than 5% on higher volume than yesterday and we moved the market to a Confirmed Uptrend from a Rally attempt. It retook its 50- and 200-DMA. However, it is trading ~1.2% below its 100-DMA. We would like the index to retake and hold its 100-DMA for further conviction. Despite a follow-through day, we are slightly cautious as the Nifty is still ~7% off-highs.

It is important that investors don’t play all their cards at once, rather take a pyramiding approach. i.e., adopting an investment approach where you begin with a small allocation and increase it as and when market advances further.