Nifty on a down swing; bank rally saves the day

FOR the second straight day, the stock market closed with negative bias. It opened with a gap up and fell sharply. There was a sharp upside in the middle with increased volatility. The Nifty finally closed at 15,208.9 with a 104.55 points loss. The PSU Banks rallied and minimised the overall market losses.

The PSU Bank index was up by 5.86 per cent. The Bank Nifty fell by half per cent as the private sector banks declined. Auto, Metal, Energy and Infra sectoral indices closed with flat to positive bias. The VIX closed at 21.50 per cent. Overall market breadth was almost 1:1 as 977 declines and 922 advances were recorded.

A total of 130 stocks made a new 52-week high. As tomorrow is the weekly expiry day, the volatility may increase, and high beta stocks will have seesaw movements.

The volatility ruled the market on Wednesday. PSU banks saved the day from a bigger fall. The Nifty closed below the previous day low and signalled first weakness sign. It also closed below the 5EMA. With today's decline, the short term indicator (5EMA) began to trend down. As cautioned yesterday, it is not a time to be aggressively bullish. The selling pressure at the swing high or a channel resistance signalled the short-term bearishness.

On a 75 minutes chart, the weakness is crystal clear in many aspects. The confirmation of negative divergence and the waning momentum is the key worries for the market now. The negative movement indicator -DMI is above the +DMI and ADX on the lower timeframe chart is not a good sign.

The RSI on a daily chart fell below the 70 and came out of the overbought condition. In case, the Nifty closes below the 15,134 mark, it will confirm further weakness in the market. Currently, the Nifty is trading 3.35 per cent above the 20DMA and just 1.35 per cent above the previous minor swing low. These levels: 14,977 and 14,715 are key supports for the near term.

(The author is a financial journalist, technical analyst, trainer, family fund manager)