It
was a pathetic week for the markets and it had a dismal close, Nifty down by
300 points that is about 3 and a half percent. The market internals (breadth)
were very poor and almost 4 out of 5 scripts corrected by about 5-10 percent.
All this happened on the back of domestic turmoil, below normal rain forecast,
failure of Union Govt. to clear Land Form reforms, farmer suicide woes, and
poorly reported corporate earnings led to this corrective action. However,
market in terms of Nifty, held the very crucial level of 8240 which was the low
registered in March 2015 and incidentally being 200 DMA (Moving Average). May
be market is in search of some positive news flows to bounce back.
Looking
at the market moves and the internals, it appears that markets will remain
volatile and choppy. On the back of any positive news flows, markets could
attempt a pull-back rally, perhaps would test the crucial resistances of 8450
to 8550, but it can come out of the woods only if it manages to close above
8700, until that markets will be in the control of the bears. Market is so
vulnerable and frail in short to intermediate term that any bad news from here
on would see the down-side and in that event market would test the low of this
year of 8060 registered in January. The fall would get accentuated if the Nifty
closes below 8000 and we should be prepared for a protracted correction in the
market.
Under
these market conditions, investors should remain cautious, and as earlier
suggested exit from fundamentally weak and high debt leverage companies in the
rally. Since the market is in a long term bull markets, long term investors can
use deep declines to buy well managed growth companies.
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