The week gone by opened with some good earnings from Godrej Properties, Indian Bank and Titan.

Shares of Titan skyrocketed 16 per cent after the company reported a 67 per cent rise in September quarter profit. Midway through the week, a warning letter by USFDA to Lupin for its two plants not only affected Lupin stock, which went into a free fall of 20 per cent, but also affected the entire pharma basket. A classic case of one bad apple spoiling the whole bunch. The Nifty pharma index declined 6 per cent, despite positive Q2 numbers from Aurobindo Pharma, whose profit surged 29 per cent but stock declined 6.75 per cent during the week.

Qater Foundation Endowment Fund sold a 5 per cent stake in Bharti Airtel through a block deal valued at Rs 9,600 crore. But surprisingly, the demand was three times, which indicated investors’ willingness to invest in the telecom sector even at high valuations, though it is still mired in intense competition. The investors were insurance firms and long-only funds. Individual investors should consider investing in the sector once it corrects.

Events of the week
Crude oil is boiling at $57 a barrel. Power consolidation in Saudi Arabia and internal family issues have come to the forefront, which have the potential to disrupt peace in West Asia. If something like Mahabharata happens, it will have far-reaching consequences for global peace.
The Indian rupee weakened further during the week, falling 0.8 per cent, its biggest weekly drop since September 22. It could be the beginning of a larger trend.

Technical Outlook
The domestic equity market witnessed cracks in its uptrend. On the weekly chart, an engulfing bear pattern has emerged, which is very reliable and powerful. All previous engulfing bear patterns on the weekly charts resulted in decent time and price correction. This time it looks no different. Traders should adopt a sell-on-rise strategy for now.

Positional long trades can book profits or alternately place trailing stop loss below 10,250 in the Nifty50. Traders should be cautious in trading on the long side.



Expectations for the week
Mahindra Logistics, one of the IPOs that didn’t impress the stock market, made stock market debut with virtually no listing gains. The stock was issued at 67 times earnings, which is high by any standards, given that the company management expects to grow the turnover by 20 per cent. Such high valuation usually coincides with bull market tops.

New India Assurance will list in the coming week, which too is expected to list below issue price. This can cause major negative sentiment in the market, leading to further correction.

The way some of the recent IPOs are valued is sign of a bull market top, at least for the intermediate term.

The GST Council, which met for its 23rd meeting on Friday, unanimously decided that only sin goods (approximately 50 items, earlier 227) be taxed at the highest bracket of 28 per cent. As a result, most other goods will see a drop in GST rates. This will definitely boost near-term sentiment in the market. In the medium term, the market will remain under pressure due to high valuation. Long-term investors should not allocate fresh funds, but selectively book profits.

The Nifty50 closed the week at 10,321, down 1.25 per cent.