Markets closed the pre diwali session near all time high. Although the “Muhurat” trading did not bode well with the bulls. Global weakness pulled the markets and sentiment lower. Nifty has slipped below its newly conquered high of 10200. Diwali sentiment ruled the streets throughout the week. Results will continue going forward and stock specific theme is likely to play out. New listings – MAS Financial and Godrej Agrovet made stellar debuts on the market. Both the stocks got a 35% premium from the street on listing day.
Technically speaking the Friday pull back should give fresh legs and a much-needed breather. 10080 will hold a key support for the very short-term. 9970 being the 50 D EMA will provide intermediate support to Nifty. On the positive side if Nifty is to hold 10180 on a weekly closing basis, one may have a massive rally squeezing shorts and surprising a lot of scared bulls. Flip side of range breaks, if there is correction in the intermediate time, Nifty can easily test the lower end of the weekly range at 9700. A double bottom is in the making still, 10180 is the key level to watch on a closing basis.
Fundamentally, nothing has changed. If anything markets just got more expensive. Historically elevated valuations will continue to keep bulls on their toes. Complacency cannot be tolerated at this levels. Time is ripe for a black swan event. Liquidity fueled rallies do not bode well for investors and this seems to be the most hated bull market. P/E is still astonishingly high and continues to stay there around the 25x multiple. Result season is underway and it seems that Nifty will decide a trend based on these results.
Globally, minor unrest continues as North Korea keeps the world and its neighbors on their toes. Kim is giving sleepless nights but none of that has boiled down to the prices. DOW continues to scale all time new highs. 23k has come – something that nobody had foreseen. Liquidity is abundant and interest rates are low giving this rally fresh room to scale new highs.
Sector watch – Infra looks promising. Keep an eye on the Nifty Infra index and its components. Some of them are near crucial resistance. A break out is on the cards. Nifty metals seem the strongest but slightly over heated index. Metals must pause. Bank is the ugly kid on the block. Nifty Bank does not look in a hurry to scale new highs while Nifty has. Unless this divergence closes, rally will not be clean.