Catch-up Game or Real Strength

Deepak Singh - Market Analyst, State of the Market

As a Technical Analyst and a trader, I am trained to believe what I see on the screen. I have no business to ask - "Why prices have moved up?" I have to just accept the fact that prices have moved up and trade accordingly. There is no doubt that market is showing more strength than weakness and more and more sectors are now participating in the upmove. On Friday, even Autos joined the upmove bandwagon.

But is this a good news or bad news? The way different sectors are participating in the rally or falling off (like FMCG, Oil and Gas, Health Care) - it appears that the current upmove in Nifty is more of a catch-up game with Global markets, than real rally because of local factors. There is no clear leadership in the market except Technology sector. One week a particular sector looks good, and the very next week - it goes out of favour. It is this aspect of rally which a trader should be little careful about.

This can be shocking news that India from being one of the most sought after market last year has become a market which is just doing catch-up game with strong up moves in global markets. One of the reasons why this has happened - Once a technical momentum gets broken in a market, it is very difficult to build it again. And generally to rebuild momentum - you need a strong fundamental reason which market has failed to get so far. On top of that, worsening inflation situation coupled with confused policy making has made matters worse.

I am not trying to find a fault with current rally. There is a saying - the most bullish thing a market can do is to go up. But as a market observer, I thought it's important to get your attention to this fact - the market needs sustainable legs to rally and that's what is missing right now. The market desperately needs clear leadership - a leadership which is backed by both fundamental and technical reasons.