Nifty enters strong bearish zone

Dalal Street declined on a renewed selling pressure at higher levels. The Rupee rebound by 14 paise helped boost the market sentiment during the opening session. But, late selling pressure leads to a negative closing. The Nifty declined by 61.80 points or 0.38 per cent and settled at 16240.05. It tested the sub 16200 levels too. The Bank Nifty and Fin Nifty are up over 0.50 per cent each. The Energy index fell by 3.59 per cent, and the Infra index is down by 1.09 per cent, FMCG index also gained by 0.49 per cent. The heavyweight private sector banks protected bigger falls in indices and the Nifty Metal index collapsed by 5.20 per cent. The broader market indices, Nifty Midcap-100 and Smallcap-100 are down by 1.87 per cent and 2.24 per cent, respectively. The VIX index is up by 1.23 per cent. The market breadth is extremely negative as 1686 declines and 407 advances. About 141 stocks hit a new 52 week low, and 160 stocks traded in the lower circuit. Reliance, Tata Steel and HDFC Bank are the top trading counters.

The benchmark indices made an effort to recover after a series of sharp declines. But the effort was unsuccessful as the selling pressure intensified when the benchmark index reached above the previous day's high. The Nifty made higher high and higher low candle, but it was a long upper shadow candle. The index closed at the day's low, showing weakness present in the market. As we expected in earlier research, bears dominate the market. Initially, the broader market breadth was positive, but breadth had become extremely negative by the end of the day. Even the index breadth is also negative. Indicators enter the oversold zone and in a strong bearish zone.

The RSI is at 32.59 and not showing any divergences currently. The Nifty futures volumes are recording above average for the last five days, and the Open Interest is up by 6.23 per cent, is a sign of short built up. Even the Bank Nifty also formed a Shooting Star kind of a pattern. The metal index declined sharply and led the marker to fall in the last hour. The broader market, Smallcaps in particular, is collapsing to the new lows. It has become very difficult to identify a stronger stock in the current market conditions. Avoid going long in this market unless it forms a bottom. Risk management is very important now.

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