Like it gets very windy on lofty mountain peaks, the market saw some turbulence last week. Should not surprise anyone as it is only expected after hitting psychologically important levels like 20,000 on the Sensex and 6,000 on the Nifty. Doubly so, as the news flow season has come to an end and the market is trying to gauge whether it has enough steam to keep climbing higher or needs to pause and take stock of the underpinnings before making the next move.
Frankly, a bit of consolidation would not be such a bad thing, globally. Markets have had a relentless move since the Fed cut rates with that one brief P-Note blip in the middle. Now that there are no immediate triggers, maybe a bit of profit taking, some pullback will generate a bit more purchase for the next move. A big correction seems quite unlikely. Locally, things are fine. There may have been a few disappointments but earnings have been generally okay and even macro factors look quite stable. Foreign flows may be somewhat subdued and futures positions slightly heavy, which could aid a possible drift in prices. Last week’s volatility could be laying the ground for such an outcome, though Friday's bullish close may equally be heralding the onset of another upmove. At this point it is difficult to foresee anything greater than a 5-10 per cent drift in the index, from recent peaks. If that happens, it may provide yet another buying opportunity for people who are underinvested to ride the next move up into the year-end.
The problem with building such scenarios is that no consolidation phase nowadays lasts beyond a few trading sessions. Time is what the market does not have. Whatever it needs to do, it does in a rush. Therefore, it may be wishful to think that the market will be sideways for a few weeks and then move again. If it has to retrace, maybe it will do so quickly and then rush up again. Or, going by the Friday pullback, it may choose not to dip much more from here. After all, there is no obvious reason to. Maybe this is all the consolidation we will see, these few days of volatility. Whatever happens in the next few days, something quite bad has to happen to prevent the market from being higher than where it is today, say, by the end of the year. Unless there is something lurking, the trend seems to be heading up. It is been a quick trek up to the 20,000 summit, what we are seeing maybe is just acclimatisation to the rarified air of the peaks.