Indicators Suggest Extended Fall

The economic data points, Inflation, added the further negative sentiment on Dalal Street. Indices fell like a knife. The Nifty sharply declined by 324.40 points, or 1.36 per cent, and closed at 23559.05. The Realty and PSU Bank indices declined by 3.17 per cent and 3.08 per cent, respectively. The Smallcap-100, Midcap-100, and Metal indices are down by over 2.64 per cent. The Auto, Media, Banknifty, and Private Bank indices are down by over two per cent. All the other sector and thematic indices declined by over a percentage point. The India VIX is up by 5.79 per cent to 15.43. The market breadth is extremely negative as 2394 declines and 419 advances. About 168 stocks hit a new 52-week low, and 279 stocks traded in the lower circuit. Newly listed Swiggy, HDFC Bank, PNB Housing, Reliance and BSE were the top trading counters in terms of value.

The Nifty continued its fall for the fifth straight day and closed below the crucial supports. It declined by 10.53 per cent from its all-time high. During the day, the Nifty declined below the 200DMA and 200EMA. The 200DMA was tested after 21st April 2023. The 200EMA was tested on 26 October 2023 and 4th June 2024. Suppose the Nifty closed below these two critical supports for at least 2 -3 days. Expect the market to enter into a deep bear market. Below 23542, the next support is at 23190. The recent counter-trend consolidation breakdown target is at 23141. In broad-based selling pressure, all the sectoral indices were negative. The Nifty met the 100 per cent target head and shoulders pattern breakdown. It is below the Bollinger bands, which is an indication of extended fall. The volumes were higher in the last four days, and the index registered a distribution day. Expect the 23542 hold as the RSI enters into an oversold territory. If there is any pullback, it must close above this session’s high of 23874 for another round of consolidation and base formation. Earlier, we cautioned about this fall and the test of 200EMA exactly what happened now. Poor earnings and economic data are the major reasons for this fall. Stay out of fresh purchases.

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