Liquidity Fueled Surge Continues; Partial Profit Booking Would Be Prudent

Keynes had aptly stated that markets can remain irrational longer than one can remain solvent! The continues liquidity fuelled surge of last week confirmed the adage.

In the week ending 4th December, The NIFTY decisively blasted past the 13K mark as the RBI, although not reducing rates, did maintain a dovish tone that suggested that they weren’t too concerned about inflation and would continue to support the economic recovery for the time being. Last week, the index surged a further 250 odd points on the back of liquidity and positive sentiment around reducing COVID numbers and developments on the vaccine front.

Momentum oscillators on the weekly charts have now been in the overbought zone all the way since October – a near déjà vu of last year.

On the monthly chart, the NIFTY made a higher high and has now decisively touched the upper Bollinger Band, signalling that the short-term upside is very limited indeed.

The best positional trade at this point would be to take profits and plough back moneys in weekly staggered tranches over the next 12-15 weeks. A material retracement is all but around the corner.

The overall trend definitely remains bullish; however, this is a very difficult and dangerous market to be buying into at this point.

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