Markets Sentiment_06.01.2018

Markets started the year on a very tepid note. For the first few sessions it gave up a lot of ground. Low volumes and holiday season did not see much action. Sentiment although was buoyant owing to global conditions. Almost all global markets are at record highs. There is a global wave of bull run that has gripped all markets. Dow topped 25k, Nasdaq 7k. In Asia Nikkei scaled 1k points in 2 days. Hong Kong was at multi-decade high. Nifty rose a percent point in the week gone by. Sentiment in our own market is tepid but bullish. Close was very strong. A day’s correction was bought into. Midcaps are again on steroids.

Technically speaking Nifty is in a make or break level. If this close of 10550+ is sustained on a daily basis next week, we can expect a runaway gap till about 10600-700. There will be short covering and squeezing. Very short-term support stands at 10480. A trade below this level in the very short-term can drag the Nifty lower. A sustained close above 10550 will lead to the short-term floor shifting from 10k to 10.5k! Keep an eye on the volumes as they are bound to pick up next week as all participants become fully active.

Fundamentally multiples are still and continue to remain stretched. P/E. P/Bv you name them are at historical highs. There are no negative news flows. It almost seems to complacent the investing environment. One has to be very cautious in trading in the current environment. Some exogenous shock can drag the market lower. The only question is when? Having said that structural bull market remains intact. A healthy correction is still to be seen.

Sector Speak – Metals will continue their bull run. Keep an eye on metal stocks. Nifty Metals should continue to hit new highs. Nifty IT index is at a pivotal level. An upward break is expected as momentum is on the bull side. Keep an eye on Infosys. Nifty Bank continues to be weak. Unless a clean break above 26k is seen, avoid the stocks.