Weekly Big Picture : Nifty Gains 2.1% for the Week; Private Banks and FMCG Lead, PSU Bank and Pharma Stocks Lag

Market Pulse Confirmed Uptrend

Weekly Action

Nifty, +2.1%; Sensex, +2.1%; Nifty Midcap, -0.4%; Nifty Smallcap, +0.7%; and Model Portfolio, +2.3%.

Weekly Market Review

The week started with a follow-through buying after the corporate tax rate cut last Friday. The market took a breather during midweek due to a brief pullback in leading sectors. After a 1.2% gain on Thursday, Nifty closed half a percent lower on Friday, above 11,500. After the market was upgraded to a Confirmed Uptrend last week, no distribution was observed, which is positive.

In the broader market, the breadth is yet to improve. Nifty Midcap and Smallcap have only 25–30% of their stocks trading above their 50- and 200-DMA. Improvement in these numbers will give us an indication of a broad-based rally. During this week, the Dollar Index increased ~1%, but INR remained strong and appreciated ~50bps. Also, crude oil prices eased during the week.

On the sectoral front, Nifty Private Bank (+4.1%) and FMCG (+4%) were the top gainers, followed by Nifty Energy (+3.5%) and Financials (+3.3%). On the flipside, Nifty PSU Bank (-5.8%) and Pharma (-3.6%) were the top decliners.

When the market is in a Confirmed Uptrend, do not hesitate to commit new capital in stocks trading near all-time high. In a phased manner, consider buying high and selling higher. Some conventional methodologies thrive within a channel, where you try to buy low and sell high. According to O’Neil Methodology, at MarketSmith India, we live outside the channel on both sides. If we feel a stock has great prospects, we enter once it breaks from a base pattern into new highs. Likewise, if our stock pulls back into a pivot or recedes to a level or hits stop loss of 8%, we trim/exit position in that stock.

Stocks in News

Maruti Suzuki India: The company announced to cut the price of its model Baleno RS by Rs 1,00,000. On Wednesday, the company had reduced the rates of select models by Rs 5,000. The stock was down 1.3% and got good support near its 200-DMA.

Strides Pharma Science: The stock was down 7.5% as the company announced to stop sale of Ranitidine tablets in the U.S. after it received ‘Information Request’ from the USFDA to provide test data related to the drug. The company also informed that Ranitidine tablets had good market in the U.S., and its front-end sales of the drug globally were $9M in H1 FY20.

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