RBI policy may spur lateral move

THE stock markets closed positively after a volatile trading session. The volumes were lower compared to the last two days. The Nifty gained 45.70 points and closed at 14,683.50. The Nifty Pharma was top gainer with 1.76 per cent gain. Metal, Realty, and the Smallcap-100 indices were up by over one per cent. The Banknifty lost 0.54 per cent and Energy, Media and CPSE indices were down by less than half a per cent. The market breadth was positive as 1157 advances and 736 declines were recorded.

The Nifty traded in a 200 points range with wavering moves. As it traded within yesterday's range, it formed an inside bar. Except for one or two days, it broadly traded in a 400 points range between 14,880 – 14,470. This consolidation with long sized bars is indicating the increased volatility. It almost tested the 50DMA, but failed to move above it. The long lower shadows for the past two days are showing buying interest at lower levels. As the RBI policy scheduled this week, the volatility may increase further. The one day up and another day down kind of movements are difficult to trade. Even on the intraday moves also trapping the traders on both sides. The Option premiums are high as the volatility and event risks are present. On a weekly chart, the bearish momentum further increased as the histogram suggested, and the -DMI and +DMI are at a confluence point.

The Nifty closed with a decent gain, but, on a low volume, and the open interest slightly declined. This is an indication of long unwinding. At the same time, none of the indicators reached an oversold condition. As they are in a neutral zone, the Nifty can take either side of the move. It will consolidate further tomorrow. Only the RBI policy may act as a trigger for directional move. Wait for a decisive breakout above 14,880 or a close below 14470.

(The writer is a financial journalist, technical analyst, and family fund manager)