It was a tug of war between the bulls as well as the bears, but selling pressure at higher levels led to over 1 percent decline in benchmark indices for the week ended June 12 while small and mid-caps outperformed.
The week which began on a positive note despite Moody’s downgrade witnessed selling pressure in the middle of the week tracking weakness in global equities, rising cases of COVID-19 across the world, a weak economic picture painted by various global agencies for India, as well as muted earnings from India Inc.
The S&P BSE Sensex fell 1.48 percent while the Nifty50 was down by 1.68 percent compared to a flat close seen in the S&P BSE Small-cap index, and 0.37 percent rally seen in the S&P BSE Mid-cap space for the week ended June 12.
There are as many as 36 stocks in the S&P BSE 500 index that rose 10-70 percent in five trading sessions that include names like Ujjivan Financial Services, Cochin Shipyard, Swan Energy, Info Edge, PC Jeweller, Granules India, and Dishman Carbogen, etc. among others.
Analysts attribute the rally to fear of missing out or popularly known as FOMO. But, we are still in a bear market rally, and investors should not be carried away with the intermediate rallies seen in D-Street as we might retest lower levels again.
“The rally past few weeks was a FOMO rally with bulls catching the bellwethers of each sector without the ground reality showing any improvement. Despite the gradual opening of the lockdown businesses haven’t started as normal or at full capacity for most of them civilians,” Umesh Mehta, Head of Research, Samco Securities told Moneycontrol.
“Hence, when the economic numbers which show a divergence to the momentum in stock prices finally gained headway, markets turned bearish. The market is expected to remain bearish going ahead at least till the index decisively closes above 10,150 only then will it reclaim momentum,” he said.
Mehta further added that on the downside, a decisive break below 8800 levels can take markets lower.
Technical Outlook:
Equity benchmarks witnessed a roller coaster move and ended the week on a subdued note. Sectorally, all major indices ended in red weighed down by metal and financials.
The index achieved our earmarked target of 9,700 on Friday (June 12), as decline accelerated upon breach of the psychological mark of 10,000. For the coming week, the upside is likely to remain capped at 10,300, but a close below 9,700 could fuel selling pressure.
“The index achieved our earmarked target of 9,700 on Friday, as decline accelerated upon breach of a psychological mark of 10,000. The sharp decline from last week’s high of 10,328 resulted in Dark cloud cover on weekly charts as index failed to sustain at higher levels. The lower shadow indicates an attempt to hold prior week’s low of 9,700 on a closing basis,” Dharmesh Shah, Head – Technical, ICICI direct told Moneycontrol.
“We expect upside will be capped at last week’s high of 10,300 mark, and the index would extend its corrective phase with immediate support of 9,700 levels,” he said.
Shah is of the view that a decisive close below 9,700 would further accelerate declines, else consolidation in the 9,700-10,300 band with stocks specific action
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