Crucial Week Ahead For The Indian Stock Market - Saturday, Jan. 23

The market scaled new life-time highs this week, but it was the bears who ultimately took control. The benchmark indices ended mostly flat for the week, but the momentum was in favor of the bears.

For the last two weeks, we have seen the markets facing resistance at higher levels. The bulls have been showing signs of tiring. Momentum was low when the market was going up, and high when the market went down. I discuss this and more in today's Momentum Moves.

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The Week Ahead

Equities proved to be the best asset class in 2020. The market has started the year on a similarly positive note. For long-term investors, nothing has changed, and I believe they should continue to hold fundamentally strong stocks in their portfolios.

I have been interacting with many investors recently. One such investor is around 54 years old and has been investing in markets since 1995. We discuss the markets every couple of weeks. This week when I talked to him, his first question to me was "Should I trim my position and sit on cash?" Well, such questions may be on your mind, too.

I simply shared a chart with him on Nifty and asked him, "Are you ready to take a hit of 5-7% in your portfolio?" I had good reason to ask him this question. If markets continue to rally until the budget or post-budget, he might miss an opportunity. I don't have an answer of how much higher the markets can go.

However, trailing your portfolio in profits might be the best decision in the current scenario, where Nifty has closed below the previous week's low since December 2020.

The bulls are in an exhausted position and the bears had an upper hand this week. This can be witnessed by the volumes in the recent bearish moves. On the other hand, the bullish moves have happened on lower volumes. We don't see any change in view for investors, but for traders, even small moves count.

Nifty Futures Continuous Daily Chart

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Disclosure: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research ...

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