It’s time to stay on sidelines on risky day

The Exit poll projections boosted the sentiment in the market. Overall, the market capitalisation (mcap) increased to a new high, over 14 lakh crore. Adani Group stocks and PSU stocks were in the limelight. NSE Nifty gained by 733.20 points or 3.25 per cent and closed at 23,263.90 points. All the sectoral indices were closed positive. The PSE and CPSE indices were the top gainers, with 8.40 per cent and 7.41 per cent, respectively. The PSU Bank index is up by 8.40 per cent. The Energy, index gained by 6.77 per cent. The Realty Infra indices are up by 5.95 per cent and 5.53 per cent. The FInNifty and Bank Nifty advanced by 4.58 per cent and 4.07 per cent. All other sector indices gained from one per cent to 3.51 per cent. The Volatility index, India VIX collapsed by 14.10 per cent to 21.13, as expected. The market breadth is positive as 1,745 advances and 948 declines. About 213 stocks hit a new 52-week high, and 225 stocks traded in the upper circuit. SBI, Adani Ports, Adani Power, and Reliance were the trading counters on Monday in terms of value.

As the exit polls projected, the BJP-led NDA formed the government with an absolute majority. With the continuity in government, it is expected that the existing policies will continue and that more government spending will boost the economy. The Niffty opened at the 23,338.70 level and traded within the first hour’s range. It formed higher highs on an hourly chart and has broken out of the rising channel. It also closed above the Bollinger bands. Currently, the index is 3.26 per cent above the 20DMA. This is an indication of the extension of a rally. Sooner or later, the index will come into the bands. It formed an open-high candle and hanging man candle, which are an indication of exhaustion and bearish. As the Nifty already met our target of the 23,155-300 zone, further upside needs stronger buying support. In any case, the Nifty closes above this level on Tuesday and expects to test 23,900 in the near term. The RSI entered into the bullish zone again with Monday’s gain. The MACD also shows the increased bullish momentum.

For the bullish momentum to continue Monday’s low 23,062 is the crucial support. Any disappointment in the majority will dampen the sentiments. On the upside, the 23,500 will act as strong resistance. Above this, to continue the rally, the buying support is needed in a big way. For now, the upside is limited to another two per cent. But on the downside, a move below 23,060 means, it can fill Monday’s gap immediately. Avoid trading on an event risk day.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)