- The Indian Nifty 50 has pulled back to the ₹18,500 level during Friday trading, as we continue to see an overall upward trend, but we also have perhaps gotten a little bit overdone.
- At this point, a little bit of a pullback probably offers value the people will be willing to pay close attention to, as India has led the rest of the world for the most part.
- While I’m not a huge fan of emerging market stocks, it should be noted that India is a special situation since they are the beneficiaries of the Chinese disintegration.
As companies leave China, this only helps India. The 50-Day EMA certainly does not hurt either, as it has just broken above the ₹18,000 level and is rising quite nicely. Because of this, it could very well be thought of as a little bit of an upward trend line, so I will be watching for price action in that general vicinity. The ₹18,000 level is an area that previously had been major resistance, so it should in fact end up being support on the way back down due to “market memory.” The size of the candlestick of course suggests that we could continue to go lower, but those are areas that I think a lot of value hunters will be willing to get involved in.
Waiting for the Federal Reserve
If we do break down below the ₹18,000 level, then that could lead to a deeper correction, but at this point, I think that is less likely than one would expect. After all, although the rest of the world has struggled mightily, India seems to have been an outlier for some time and I think that may continue to be the case. The Indian stock market has outperformed her, and it’s a bit difficult to think that will be any different going forward.
All of that being said, we will have to pay attention to what the Federal Reserve has to say next week, due to the fact that the interest rate market will have it say as well. It’s also worth noting that recently the Bank of India raised interest rates 35 basis points, which was a little bit hotter than anticipated. Because of this, we will continue to see a lot of volatility.
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