Selling pressure on Nifty makes bears tighten grip

FINALLY, the bears have tightened grip on the market. Broad-based selling pressure fuelled the decline. The Nifty fell sharply by 306.5 points or 2.04 per cent and settled at 14,675.70. The defensive sectors IT, Pharma and Auto indices fell over 2.5 per cent each.

The only metal index closed in the green with a 1.6 per cent gain. Nifty Midcap-100 and Smallcap-100 declined by 1.2 per cent. Banknifty and FinNifty were down by 1.6 per cent each. Only ten stocks were able to close in positive territory in Nifty-50 stocks. The market breadth was extremely negative as 1,388 declines and 561 advances were recorded. As the US bond yields and the Dollar index are rising, the market participant feared that the FIIs inflows might stall or lead to a profit booking. Importantly, the Indian market valuations reached at overstretched levels among the emerging market, and it is feared that the market may enter a correction phase.

The stock market tumbled with aggressive selling pressure from the institutional players. The suspicions about the market direction in our previous column have become a reality. The last week's bearish engulfing pattern on a lifetime high, shown its implications.

The Nifty closed below the 20DMA, as expected and closed at day's low, signalled the weakness. It closed below the 3rd February breakout level of 14,753. Now the immediate support is at 50DMA or the gap area support of 14,436-469. The Nifty may hold this area, or it may fill the gap by falling towards 14,336. As the broad-based selling seen in the market, the weakness may continue for some more days. As the Nifty closed below the 38.2 per cent retracement level, the 50 per cent retracement level of 14,514 is also near the 50DMA. The RSI has declined below the 50 zone and staring at the bearish zone.

The bearish momentum has increased as the market witnessed a sharp decline. The volatility index, India VIX closed at 25.47, indicating a storm is to strengthening. Five per cent fall from the last week's high, mainly because of selling pressure in the large caps is not good for them. For once market drivers BFSI, IT and Pharma sectors weakened. The bellwether stock Reliance is too not supporting the market. Currently, the price structure is bearish and be with the trend. Only in case closing above the 20DMA for consecutive days will give confidence to the bulls

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