Nifty signals long-term bearishness

Indian equity markets experienced another black day on a massive selling pressure came in the last 90 minutes. The heavyweight, Reliance's 3.81 per cent surge did not help the index to sustain. The Nifty declined by 215 points or 1.25 per cent and closed at 16958.65. The IT and the FMCG indices fell by 2.9 per cent each. Many of the other sectoral indices declined between 1 to 2.5 per cent. The Bank Nifty declined 1250 points from the day's high in the last one and half hours. Only the Energy index closed flat to positive because of the Reliance surge. The market breadth is extremely negative as 1561 declines and 508 advances. About 119 stocks hit a new 52-week high and 134 stocks traded in the lower circuit. HDFC Bank, HDFC and Reliance were the top trading counters today.

The optimistic hopes of yesterday's Southern Doji drained. The Indian stock market nosedived for the second successive day with a flash sell-off in the late afternoon session. The benchmark index decisively closed below the 50 and 200DMAs. The Nifty is much below the short-term averages. The 20DMA has now entered a downtrend. After a flat journey for eight days, the 50DMA also entered a downtrend. These short and medium-term indicators are into a downtrend and the Nifty with four distribution days. The market is clearly in a bear's grip. The index also tested the 50 per cent retracement. It declined by over 7 per cent in just nine sessions. This kind of sharper decline expects in the previous columns. It may test the 61.8 per cent retracement level 16604 this week with high probability. The MACD histogram shows an increased bearish momentum. The RSI tested the 40 zones. The KST indicator has given a fresh sell signal. Many indicators suggest the long-term trend is bearish. The Nifty may test 14350, which is a 38.2 retracement level of the uptrend from the March 2020 lows. There are several supports at 16774, 16604 and 16458 in the short term. Before forming a base at the lower level, the Nifty may experience many bounces, which are counter-trend in nature. For now, try to reduce the exposure to the equities. Focus on companies that are accelerating the earnings growth.

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