Markets Weekly Sentiment_17.02.2018

Markets had a flat week closing wise. There was quite some action during the week price wise. Nifty gave up the 10600 levels very easily to close near last weeks close of 10450 levels. Sentiment is hit across the street. PNB scam has led to an over all pessimism and uncertainty is back. This can be seen with the price action in PNB itself. Players are still not confirmed how deep this scam will be and what skeletons will tumble from the closet. Having said that fear has definitely gripped the market participants. Caution has been over played. Mid and Small caps have resumed their downwards movement.

Technically looking, Nifty did not scale back its 50D EMA around 10600. It chose to fall back from those exact levels. The downward play is open till 10000 should the last lows of 10270 fail to hold. It will be a classic test of recent lows before market is sure what it can hold. If 10300 gives way another slide of 5% cannot be ruled out. On the upside 10600 is the level to watch out for positional traders. 10000 remains the ultimate test. It is also the 50W EMA and 200D EMA. Lot of smart money will be watching these levels in the days and weeks to come.

Fundamentally we have not moved a needle. Although some consolidation is welcomed. Multiples are still stretched beyond historical averages. P/Es still above 25x after topping out at 27-28x in January. Things are still very overvalued and a further fall cannot be ruled out. A black swan can make the pain even more obvious and may hurt sentiment further. Caution is advised.

Sector speak – IT is a smart sector in times of volatility. It can be a good place to hide. Stocks would be relatively stable. NIFTY IT index has corrected and can be poised for a decent upmove. Metals are looking unstable. NIFTY METALS in on shaky grounds. If it does not take out its recent highs the sector will be badly hit. A revisit to 3500 is not ruled out. NIFTY BANK stands at a very critical levels of 25000.  It was the last top to be broken. Some demand is likely to enter – having said that it is a scam struck sector. Catching a falling knife is not advised. Watch for 25000 and how the index behaves around these levels.