Avoid Highly Leveraged Positions

With RBI’s liquidity measure, the market recovered some of the previous day’s losses. The Nifty gained by 128.1 points or 0.56 per cent and closed at 22957.25. The Nifty Realty is the top gainer with 2.17 per cent. The FinNifty, PSU Bank, Banknifty, and Private Sector Bank indices gained over 1.50 per cent. The Auto and Services indices gained by 1.34 per cent and 1.11 per cent, respectively. The Nifty Pharma and Healthcare indices declined by 2.33 per cent and 2.12 per cent, respectively. The CPSE and PSE indices are down by 1.30 per cent and 1.20 per cent. The market breadth is negative as 1920 declines and 940 advances. About 538 stocks hit a new 52-week low, and 346 stocks traded in the lower circuit. HDFC Bank, ICICI Bank, Axis Bank, Kaynes, and Bajaj Finance were the top trading counters in terms of value.

The Nifty has formed a long-legged doji on a 0.56 per cent gaining a day. It formed a higher low, higher high candle with higher volume. Normally, this price structure is an indication of the bullish bias. However, the extremely negative market breadth does not give convincing info about his recovery. The Banks and Financials led the recovery. HDFC Bank, ICICI Bank, Axis Bank, and Bajaj Finance alone contributed 127 points in sessions gain. The Nifty filled yesterday’s gap and did not sustain at higher levels. This session’s recovery is mainly due to the short-covering. The FIIs have exited the short positions for the last four days as the expiry and the event risk are nearing.

Technically, session’s recovery has not given any decisive directional view. The Doji candle needs to be closed above it for the confirmation of the reversal. The index faced resistance at 8EMA again. The India VIX has not cooled off, and the Implied Volatility has increased further. Expect more spikes in the volatility till the Budget. Post-event, the volatility will collapse. Till then, expect impulse swing on either side. The RSI is in the bearish zone. The short coverings and rollovers will play an important role for the next two days. The Rollovers are at 47.62 per cent. Expect Monday’s low of 22786 will be protected at least for the next two days. A close above 23084 is positive, and it can test the 23375. But, a close below 23950 will be negative and will resume the downside. Avoid highly leveraged positions.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)