Stay Neutral Till Budget Presentation

The equities rallied for the third successive day. The derivatives expiry trade adjustment played a major role. NSE Nifty gained by 86.40 points or 0.37 per cent and closed at 23,3249.50 points. The CPSE and PSE indices were the top gainers, with 2.12 per cent and 1.90 per cent. The Realty FinNifty, Oil and Gas, indices gained over 1.5 per cent. The Energy, and Pharma indices advanced over one per cent. The Consumer Durable index is down by 1.84 per cent. The Media, and IT indices declined over one per cent. The India VIX declined by 6.71 per cent to 17.39. The market breadth is positive as 1,549 advances and 1,256 declines. About 64 stocks hit a new 52-week low, and 142 stocks traded in the upper circuit. Bajaj Finance, Tata Motors, HDFC Bank, Adani Ports, and Voltas were the top trading counters, in terms of value.

After three days of the rally, the Nifty closed near to the 20DMA. The last hour’s short covering rally has recovered the intraday dip. The Nifty has formed a Shooting Star candle just before 3 pm. The Nifty gained over 115 points in the last 30 minutes, with a higher volume. The Nifty has faced resistance at 20DMA and closed above the 8EMA. In the previous three days of recovery, the index has formed one indecisive Doji candle and two bull candles. The rally was mainly due to the short-covering. The volatility has been at its high recently, a common phenomenon before the event arises. The emotions influence the price and will continue for another two days. The volatility will collapse to its mean.

The Nifty closed above the prior day’s high with higher volume, showing strength in the trend. But the momentum is lagging. The breadth is not so great as the previous day. The RSI has formed a positive divergence, which is a sign of probable reversal. The sharp rise in the last 30 minutes is because of expiration adjustments. Otherwise, the index has formed a Doji candle. The Bollinger bands began to contract, indicating more consolidation. As the index completes its mean reversion on both sides, now the price behaviour is crucial around the 20DMA. The 23,500 – 22,800 zone is crucial for the index for a directional bias. Technical analysis is null now as the emotions are high. Stay neutral and sideways till the budget presentation is over.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)