The current state of the markets
As on 18th September, 2018 Nifty has lost around 4.2% from the top of 11760 it made in August. The one way journey upwards in the previous two months brought the markets to a dangerously overbought levels. At the peak the PE was 28.72! No doubt a correction was overdue.
But the not-so-comforting thing is markets have not stopped sliding downhill. It is only good for retail participants that the selling is not continuous but only continual!
Poor Bank Nifty! How badly has it been battered and bruised! The weakening of the rupee, rising crude oil prices, the NPA issues, etc. all are weighing heavily on banks. From the high of 28388 in August it has shed about 7.3% in less than three weeks. Technically, Bank Nifty is in a downtrend. It could fall up to 26250 levels where it has strong support.
Since Bank Nifty has a good weightage on the Nifty the former is dragging the latter along with it. Fundamentally, the Nifty 50 stocks are strong enough.
At 11280 levels of the Nifty we shall soon see a bottom. Hopefully by this week’s end a reversal might come. The festival season is approaching and consumer stocks should drive the markets from hereon.
Among stocks, the mid-cap space is best left out for now. Pharma and IT are dancing to the rupee’s tune, yet it is only a matter of time before the rally fizzles out.
Large-caps have been the flavor for pretty much of this year. Chances are the quality names are already quoting a huge premium, but still if one could find room for further growth the premium valuations then are justified.
Happy trading friends!