Markets had a rough week. Sentiment changed for the worse. Nifty, from all time new closing highs fell right below 10k. Friday’s fall was particularly steep and worrisome. Weekly cut on the Nifty was of more than 100 points. Sentiment turned for the worse and participants see deeper cut on the index. Fall across the market was deep. Mid-caps and Small-caps were butchered and badgered out of shape. Cuts across some of the counters were as deep as 7-10%.
Technically Nifty is below support of 10k. 9950 can break easily if the fall is not restricted. 9900 is the 50-D EMA. That should provide intermediate support. Sentiment is bearish no doubt as last highs were not taken out. Early days for a double top, but Nifty sure is not sustaining at high levels. Next week it is crucial that Nifty hovers or settles near the 9950 level. Should this break you are likely to test 9700.
Fundamentally markets are at 26x P/E. The valuations continue to remain elevated and above historical levels. Domestic flows continue to barge in. FIIs continue to sell heavily. They have sold about 15k crores this month and sell every day. The quantum of FII selling is more than matched by domestic MF flows. SIPs continue to flow and support the markets.
Globally, DOW is above 22k. Fed stayed put with rates however have indicated an imminent hike in December. North Korea continues to threaten world safety and give bears new hopes and reasons to fall. US retaliated with some actions of its own. Situation remains skeptical.
For the week Metals look like to continue its correction. Having said that they will be a good buying opportunity. Some of the indexes are showing signs of reversal however confirmations are far off as of now. One has to wait and watch for indices to breach key support zones. Pharma and IT continue to be safe bets. Banks are weakest.