Markets had a turbulent week. Sentiment was soured by the sell off. Nifty cracked over 300 points. Expiry week did not live up to any bullish expectations. Starting off from Korea and leading to global FII sell off markets took a 2.5% hit. GDP numbers were as expected. 6.3% growth came in after a wait of nearly 5 quarters. Fiscal deficit although is likely to surpass government annual target. Mid-caps fought well although gave up finally in the Friday sell off.
Technically, Nifty is at pivotal support. Last low of 10094 is going to be tested. Closing has come below 50d EMA around 10200. This is a negative sign. One has to watch Monday’s action. 10400 & 10500 are the levels to cross for any upmove to happen. On the hourly charts, Nifty looks a bit oversold. A short-term bounce cannot be ruled out next week. If sentiments do not degrade further, Nifty can reclaim 10200 levels by next week.
Fundamentally, a 2-3% correction does not mean anything. Barely it will bring down the multiples. Nifty is still around peak valuations. Historically high valuations do not bode well. Exogenous shocks are always a threat and even minor dents in sentiment can send markets for a toss. GDP number was encouraging. Growth reversed after 5 quarters of decline. Not much can be read of it, but would be worthy if it sustains for a couple of more quarters. With Gujarat elections coming markets will be on its toes.
Globally, decoupling was witnessed. Dow was up almost 600 points, NASDAQ cracked by 1-2% and rest of the world was not even close to matching US stock market performance. Towards the end of the week, impeachment news soured the sentiment. However, the DOW recovered almost all of its lost 300 points. FED policy, Trumpeachment will keep US markets volatile. Asia does not look good either. Sell off in Heng Seng market coupled with FII selling across Asia has led to subdued prices.
Sector views – Nifty Bank is right at is 50D EMA and double top support at 25100-200 zone. Keep an eye on its constituents. This will be the make or break sector. Nifty Energy is showing similar patterns to that of Nifty Bank. It is likely to take support and may be even reverse. All major indices are near critical short-term supports. A break of another 0.5-1% of these supports will create a further sell off. One has to trade the bounce with caution.