NSE Nifty's steep fall points to certain reversal

The Indian stock market tumbled as the Budget is nearing. Over 800 points fall in just four trading sessions, and the possible confirmation to the previous week's bearish pattern is showing a sense of the market intermediate top is in place. The Nifty lost 271.4 points and closed at 13,967.50. Now the Nifty is at current month's lowest point. Barring FMCG, all the sectoral indices closed with losses. Banks and Financial services indices fell sharply by 2.93 per cent and 2.77 per cent. Auto, Metal and Pharma sector indices also fell by over two per cent. India VIX was higher by 4.94 per cent and closed at 24.39. The overall market breadths were in significantly negative as 1,233 stocks declined, and 637 stocks advanced. Only 341 stocks were unchanged. As the FIIs are interested in booking the profits of the last three months, the market may witness further distribution.

The Nifty collapsed sharply over two per cent and closed below the prior low. It retraced 50 per cent of the recent swing and took a support for the day. The fall is violent as it fell sharply by 824 points from the recent top. Currently, the Nifty formed a second swing low, and any pullback below the previous high will provide reversal signs.

After two back to back bearish Doji candles, finally, bears are getting confirmations and grip on the market. Nifty closed at a day's low and below the 34EMA. As we projected yesterday, the Nifty met our target of 14,076 and sharply below psychological 14,000 levels. The Nifty fell below 50 zone, and the MACD histogram further increased to the September low. The RSI closed below another swing low. The negative movement indicator, -DMI closed above the +DMI means the bears are dominating the market.

ADX is also declining. It registered second consecutive distribution day.

Now the important 50DMA support is just 1.91 per cent away at 13,707. The distance between the price and the long term moving average 200DMA shrunk to 21.55 per cent from over 30 per cent. I have mentioned these sings for overstretched market much earlier. The Budget may become a trigger for the market to attain a reasonable valuation. Currently, all the technical parameters turned negative. The earlier swing low of 14,222 will act as resistance for near term. A sustained pullback above this level only will give a chance to the bulls to recover.

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