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Broader Markets Outperform During the Week; M&M Q1 Earnings Missed Estimates

Posted Date: August 07 2020
Weekly Action

Nifty, +1.3%; Sensex, +1.2%; Nifty Midcap, +4.1%; Nifty Smallcap, +5%; Model Portfolio, +3.6%.

Market Pulse Confirmed Uptrend

Weekly Market Review

Nifty started the week on a weaker note. On Monday, it breached its 21-DMA and also added a distribution day, taking its total count to three. However, it staged upside reversal on Tuesday and closed in positive territory during the rest of the week. On the weekly front, barring Nifty IT (-0.4%), all other indices closed in the green. Nifty Metal (7.8%) and Auto (+3.8%) outperformed. Nifty FMCG, Pharma, and Realty closed the week with a gain of 1.5–2.0%. The action in Nifty Midcap (+4%) and Smallcap (+5%) was very good. Many quality names, especially from the Pharma sector, broke out from its base and rallied. Yesterday, RBI in its MPC meeting, maintained repo rate at 4%, reverse repo rate at 3.35%, and accommodative stance. During all five sessions, advance-decline ratio was skewed toward advancers.

Nifty closed more than 1.5% above its 21-DMA (11,022). We would like to see Nifty hold its 21-DMA. It is important for Nifty to move above 11,341 (high during current rally) from where it staged an intraday downside reversal on July 29. In case distribution day count increases and Nifty breaches its 21- and 200-DMA, we may downgrade the market to an Uptrend Under Pressure.

The Indian market remains in a Confirmed Uptrend. We would like to see fresh names flexing their muscles for a sustainable rally. Finding favorable entries into powerful breakouts may be the best use for new money in the current market. However, things can change quickly due to high volatility. We are operating in an uncertain environment where information is distributed unevenly, wherein outside forces, either intentionally or unintentionally, affect prices across various time frames. We will continue to monitor the behavior of the market and keep an open mind as to how it unfolds.

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