Weekly Big Picture : Nifty Reclaims 21-DMA; PSU Bank, Auto, and Metal Stocks Gain during the Week

Weekly Action

Nifty, +1.4%; Sensex, +1.4%; Nifty Midcap, +1.2%; Nifty Smallcap, -0.8%; and Model Portfolio, +1.9%.

Market Pulse Uptrend Under Pressure

Weekly Market Review

The week started with muted gains and we added sixth distribution day on Tuesday. There was a shift in momentum after Nifty rebounded sharply on Wednesday. Nifty gained more than 200 points from Wednesday’s low and also reclaimed its 21-DMA. The action was mixed in the broader market. Nifty Midcap was up 1.2%, while Smallcap closed 0.8% lower.

We wish to reiterate our stance on the market during the week; though Nifty slipped further below its 21-DMA and distribution day count was elevated, few points advocated that the damage was not significant and the market can be back in good momentum: 1) Nifty was just 2.5% below its all-time high. 2) Nifty was ~1% above its 50-DMA. 3) There were only pockets of weakness where there is high volume selling. Many of the leading names are consolidating gains on lower volume, above their key moving averages.

On the domestic front, India’s industrial output declined 3.8% m/m in October on the back of poor performance across all sectors while the retail inflation rate increased in November and stood at 5.54%. Domestic air passenger traffic grew 11.2% y/y in November. This was the fastest growth recorded since December last year.

On the global front, Trump said on Twitter that the U.S. and China were nearing a “big deal” that could avoid fresh tariffs, planned to go in effect from December 15, and potentially roll back some existing duties. The global market reacted positively to this. In the U.K., Borris Johnson returned to power and promises Brexit by January 31.

On the sectoral front, barring Nifty Media (-1.2%), IT (-0.6%), and FMCG (-0.4%), all other sectors closed in the green. Nifty PSU Bank (+4.5%), Metal (+3.5%), and Auto (+3.4%) were the top gainers. Among others, Nifty Realty, Energy, Banks, and Financial gained 1.5–2.5%.

Looking forward, we will change the status to a Confirmed Uptrend if Nifty retakes 12,159 level (high during the recent rally). We would like to see an additional follow-through day where Nifty gains more than 1.5% on above average volume. It can trigger a fresh rally and push markets into higher highs. As the markets are recovering, 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 the market advances further.

Key News

Bgr Energy Systems (+20%) was awarded a contract by the Tamil Nadu Generation and Distribution Corporation Limited for execution of 1×660 MW supercritical ennore thermal power station expansion project under EPC basis. The total value of the project is Rs 4,442 crore.

Mastek (+5.4%) sells its partial stake in Majesco (USA) for $15.94M.

Magma Fincorp (+4.9%) raised Rs 350 crore via NCDs from Nederlandse, a Dutch Entrepreneurial Development Bank, to support the company’s ongoing growth plans. The NCDs issued on a private placement basis are unlisted, redeemable, senior secured, and transferable.

What do you think? Please email us any questions or comments.

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