Weekly Markets Sentiment_28.10.2017

Markets staged a near 1.5-2% rally on the front-line indices. Nifty closed at fresh all time highs and it’s the second week a closing is above key levels. Results season continued and the big break came from the governments recap plan. PSU’s were the flavor of trade and investments. Huge capital infusion from government has changed the sentiment and things look rosy as far as PSU sector is concerned. Some of these banks staged a 45%+ single day rally.

Technically speaking, sky is the limit. Charts warrant some consolidation. Having said that all closes above previous double tops around 10180 will only give fresh legs to this break out. Charts of Nifty particularly look strong on a daily time frame. Weekly, a minor RSI top needs to break for a sustained and confirmed break out. If Nifty falters here, this could call for a deep pull back.

Fundamentally, P/E with the mixed results stands around historical highs. Liquidity is abundant. The one lagging sector sentiment has turned around. It seems as if complacency is around the sentiment. Lack of sheer negative triggers keep pushing valuations higher. This seems to be a sustainable trend unless an exogenous shock is produced. Some of the prices are at an eye-popping levels. IPOs are in full flow and keep getting subscriptions as if there was no tomorrow.

Globally – Amazon the king pin of B2C and B2B business shot up taking the markets in US to all time highs. Jeff Bezos became the world’s richest person. Trump’s tax push gives strength to the over all market sentiment there. Catalonian struggle in Spain is one to keep an eye on. Although currently undiscovered it cannot be ignored.

Sector watch – Banking clearly to lead the rally. New tops are still far out on Bank Nifty but should that happen – Nifty Bank can hit 25-26k in no time. Metals keep shining as across the board commodity prices remain firm. Be advised Metals is still overheated. Good time to book profits in Metals. Auto has given a breakout. Watch out of Auto stocks which may follow suit. If sustained Nifty Auto index can rally another 5%.