Good, Bad & Ugly Weekly Review : 13 Dec 2024

Markets Overview

On the hourly chart, Nifty showed minimal net movement from last Friday’s close to this Friday’s close, though it wasn’t without action during the For the first four sessions—Monday through Thursday—there was mild consolidation, and prices barely budged. Then, on Friday, the market initially broke down supports in the first two hours, creating the impression that the ongoing rally had ended. However, a dramatic V-shaped recovery began in the third hour, not only reversing the entire day’s loss but also pushing prices to the week’s high. This strong intraday rebound suggests a robust underlying buying interest. Although Nifty was up only about 0.3% for the week, the takeaway is that the market remains resilient, refusing to weaken significantly.

On the daily chart, the 200 DMA continues to act as a strong support. A few weeks ago, Nifty tested the 200 DMA and bounced off. Since then, there have been two instances—last Thursday and again this Friday—where sharp intraday declines were quickly reversed. This pattern indicates that the market remains well above its critical supports and, in my view, is now looking ahead towards making a new all-time high. As long as the index holds above the 200 DMA, the trend appears constructive.

The weekly chart also supports this positive bias. This week’s price action took place entirely within the previous week’s candle, forming an inside week pattern. Breaking either the previous week’s high or low will be needed to confirm the next move. Given the rapid ascent from 23,300 to 24,800 in recent weeks, some consolidation is natural. Still, the overall message from the weekly candles suggests the path of least resistance lies upwards, and an attempt at all-time highs seems likely in the near future.

S&P 500 Overview

On the global front, the S&P 500 dipped by about 0.64% this week, but it has been on a remarkable rally since October of last year. With the U.S. markets performing strongly, it’s usually challenging for other markets to turn significantly weak. Often, a rising U.S. market helps support stability or upward momentum in other global markets, including India.

GOLD Overview

Gold remained relatively stable, giving up some gains from its recent highs. After touching near 7,884 INR earlier in the week, it ended around 7,649 INR, up 0.7% for the week. Gold appears to be consolidating in this range, potentially gathering strength for its next directional move.

Dollar Index Overview

The dollar index is a key factor influencing global liquidity flows. After a short-lived decline, the dollar index is showing signs of strengthening again. If it continues to rise, we may see outflows from emerging markets and precious metals as investors shift funds back into dollar-denominated assets. Additionally, regulatory changes and KYC requirements have led some foreign entities to partially liquidate their Indian holdings, contributing to market fluctuations.

Benchmark Indices Overview

Benchmark indices were largely flat this week, with the Midcap index gaining 0.38% and Nifty 50 rising 0.37%. The Nifty 500 added just 0.2%, while Nifty Next 50 and Nifty Small Cap slipped by about 0.1%. Over one month and six-month periods, all indices have recovered nicely, and on a one-year basis, returns are robust. The Nifty Next 50, Small Caps, and Midcaps lead the pack with gains of 42%, 34%, and 30% respectively, while Nifty trails at a still-healthy 18.4%. Over the last five years, Nifty’s 15.44% CAGR is above its historical average of around 12.5%, but not indicative of a bubble. This reasonable long-term growth rate helps ensure that dips continue to attract buyers.

Sectoral Overview

Sector-wise, IT stocks stood out this week with a 2.9% gain. Various sectors, including metals, financial services, and commodities, notched modest gains between 0.5% and 1%. On the other hand, public sector enterprises, autos, pharma, oil and gas, FMCG, energy, and PSU banks slipped 1%-2%, while media dropped sharply by 6%. Over the past year, media has been the main laggard, while FMCG and private banks have also underperformed. In contrast, real estate, central public sector enterprises, IT, and pharma delivered strong returns ranging from 36% to 45%. This sectoral rotation is a regular feature of the markets, and maintaining a strategy that captures emerging leadership is crucial.

Currently, IT, real estate, services, and financial services have the best overall momentum scores. If you are a discretionary investor, these sectors may present buying opportunities on price dips. In a market driven by sector rotation and shifting global flows, adapting to changing conditions and focusing on sectors showing strength is key to successful investing.

Rebalance Update for the week !