Heightened Volatility Till Union Budget

HDFC Bank earnings made a difference. The Nifty gained by 130.70 points or 0.57 per cent and closed at 23155.35. The Nifty IT index is the top gainer with 2.14 per cent. The Services, Pharma, Healthcare indices gained over half a per cent. The Nifty Realty index is the top loser with 4.56 per cent. The Media, Smallcap, PSE, and CPSE indices ended with over 1.5 per cent declines. The India VIX is down by 1.66 per cent to 16.77. The market breadth is negative as 2052 declines and 780 advances. About 155 stocks hit a new 52-week low, and 198 stocks traded in the lower circuit.

The Nifty has recovered 188 points from the day’s low. The HDFC Bank earnings have boosted the sentiment and recovered sharply. The index has formed an inside bar with a lower volume. This recovery must move above the 23255 to confirm the counter-trend consolidation. The hourly RSI is also in the neutral zone. The daily RSI is still in the bearish zone. On 131-point gains, the market breadth is extremely negative at 1:3. The Volatility is at its highest level. Expect more violent swings on an intraday basis. If the VIX reaches over 18, expect the intraday swings to be more impulsive. Till the budget, the volatility will be higher. On the upside, a move above 23255 will be positive. But, Monday’s high of 23426 is the strong resistance. Only above this, the index will rally. If this recovery does not sustain a negative close, it will resume the downtrend. A close below 22976 will test the 22800 and 22600 zone of support. As the budget is just 8 days away, it is advised to be cautious on both sides.

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