Since 2012 Nifty Auto Sector had delivered phenomenal returns of more than 300x times Return on Investment. That shows the significant presence of longer time-frame participants who believed in the growth story and economics of the auto sector. Also sheer out-performance when compared with benchmark index Nifty 50.
On the weekly charts momentum buyers are coming and buying every break. Momentum drivers are the trend makers in the current rally. They bought despite the recent global and local extreme negative sentiments like BR Exit, Surgical Strike attacks. Definitely would have raised the eyeballs of sidelined and newer investors.
However too many consolidation patterns on the weekly charts indicates a possible distribution activity could be underway and long term buyers drying up and lacking momentum to drive the rally further higher which is a weaker sign of trend persistence.
Nifty Auto Daily Charts
Our take is whomever going to invest at this juncture in auto sector are more likely to end up catching unfair price and more likely not going to favor shorter term buyers and medium term buyers in this sector as the odds of trend reversal is high.
Possibly investing activity in Nifty Auto sector is drying up, momentum starts to lag and more likely to under-perform benchmark index in the medium term. Probably a better time to hedge the long term positions if one still believe in the growth story.