Nifty indicates long-term bearish sign

The Indian equity market nosedived with broad-based selling pressure. The benchmark indices corrected more than 6.5 per cent in five sessions. The Nifty declined by 468.05 points or 2.66 per cent and closed at 17149.10. All the sectoral front, it was a bloodbath as indices ended over 1.5 per cent to six per cent declines. The broader indices Nifty Midcap-100 and Smallcap-100 indices are down by 3.86 per cent and 4.78 per cent. The Realty and Metal indices were the worst hit, with 5.90 per cent and 5.23 per cent loss. The Media index is down by 4.59 per cent. The volatility index India VIX surged by 20.85 per cent and closed at 22.82. Only two of Nifty 50 stocks were able to close with gains. The broader market breadth extremely negative as 1948 declines and just 167 declines. About 56 stocks hit a new 52 week low, and as many as 426 stocks traded in the lower circuit.

The frontline indices continued the sharp decline for the fifth consecutive day. The Nifty retraced more than 61.8 per cent on Monday and recorded the worst fall after November 22. At one point, it declined below the 17000 level before it recovered at the end of the day. From the high on January 18, the NSE Nifty fell by 1201 points or 6.55 per cent. It is trading below all short and medium-term moving averages. It declined below the 150DMA on an Intraday basis, but it was just holding with the last hour recovery. As the index closed below the 61.8 per cent retracement level, It has given a clear bearish signal.

The RSI closed below the 40 zone and signalled that the market is currently in a bearish zone. The MACD line is sharply down below the signal line, and the histogram shows a sharp surge of bearish momentum. As the VIX surged over 22 per cent, the market will see large ups and downs before the budget. In any case, the budget fails to enthuse the market, it may decline below the recent swing low of 16410.

As the Nifty closed below the prior breakout level, below the previous slopping trendline, it registered a failed breakout and resumed the downtrend. It failed to form a new high and a lower high, and there is a high probability of a serious correction. Another important observation is that the Nifty closed below the 30 Weeks moving average is a long-term bearish sign. A weekly close below the 17210 will seriously affect the downside. As the decline is sharper, we may see some short-covering before the monthly expiry. It needs to sustain above 17314 -510 for a positive reversal on the upside. Watch these levels on the upside, and 17000 will act as key psychological support.

(The author is financial

journalist, technical analyst,

family fund manager)