Daily RSI nears oversold zone
As the NSE benchmark broke a 9-day consolidation, expect the downward move will continue; Around 22,600 level, short-covering and rollovers will play a major role in direction
image for illustrative purpose
The all-round selling pressure dragged the equities to a new low. NSE Nifty declined by 263.05 points or 1.14 per cent to 22,829.15 points. All the sectoral indices closed negatively. The Media index is the top loser with 4.73 per cent. The Smallcap and Microcap indices are down by 3.84 per cent and 3.41 per cent, respectively. The Nifty is down by 3.36 per cent. All other indices declined by 0.49 per cent to 2.95 per cent. The market breadth is extremely negative as 2,535 declines and 352 advances. About 452 stocks hit a new 52-week low, and 424 stocks traded in the lower circuit. ICICI Bank, HDFC Bank, CDSL, Infosys, and Laurus Labs were the top trading counters in terms of value.
The benchmark index, Nifty, made another new low at 23,786.90. Earlier, we expected that the 22,800 would be tested in the short term and before the budget. The volumes were lower in the last eight days. This session’s fall, with extreme market breadth, indicates further pain in the market. As the event risk (Budget) is nearing, the implied volatility has increased to 18.55. The India VIX is also up by 8.33 per cent to 18.14. The spike in the volatility hints at more volatile moves on the cards. But it also shows that the index may find support near the 22,600-800 zone.
The index and the VIX have an inverse relationship. Technically, the Nifty trades at the new low and far away from the key moving averages. It is 4.24 per cent below the 50DMA. The weekly RSI entered into the bearish zone, and the daily RSI (33.66) is near the oversold zone. The Nifty has corrected 13.23 per cent from the top and completed the Category-1 correction. It must hold the 22600-800 zone of support to avoid Category-2 correction of 25 per cent from the top. Any bounce from here must sustain for at least a week and move above the 200DMA of 23,640. Prior to that, a close above the previous day’s high will give a clue about the bounce. As the index broke a nine-day consolidation, expect the downward move will continue. Around 22,600 level, short-covering and rollovers will play a major role in the direction. It is better to stay on the sidelines until the budget and wait for Volatility to cool down.
(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)
