Short Term Upside Capped; Gravity-defying NIFTY ripe for a pullback

As anticipated in the previous week’s commentary, the bellwether index continued its gravity-defying breakout, rising another 500 odd points as global sentiments and a tidal wave of liquidity pushed stock prices higher on COVID vaccine hopes.

All technical signs point to the rally continuing, but the astronomical current P/E level of 35X does not bode very well for the index. It’s unlikely that the tearaway rally in the index will continue gathering momentum.

Having said that, the NIFTY may well test 13K before retracing; but a retracement is definitely on the cards at this point.

Once rationality sets in, we are quite likely to witness an 800-1000 point retracement in the index in a short span of time.

The index continues to be in buy on dips mode; but any sort of trading is discouraged at this point due to extreme short-term uncertainty.

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