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Indian markets trade higher; Bank Nifty back in action!

Karan DSIJ
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Indian markets trade higher; Bank Nifty back in action!

Update: Indian markets were seen trading near the day’s high, aided by strong recovery in banking & financial stocks with Bank Nifty and Nifty Financial Services climbing by 1.21 per cent and 1.19 per cent, respectively. Around 9 out of 12 stocks of Bank Nifty index were trading in green.  

Indian markets witnessed a grim start on Thursday as the country recorded more than 3 lakh COVID cases, which is the highest single-day spike ever for any country. 

However, after initial jolt, the bulls have managed to bounce back with Nifty recovering more than 120 points from the day’s low and trading above the 14,250 mark while Sensex was seen trading above the 47,500 mark. Despite trading modestly, the advance-decline ratio is in the favour of advances amid the outperformance displayed by the broader market with Nifty Mid-cap and Small-cap gaining 0.35 per cent and 0.64 per cent, respectively.   

Among the sectoral indices, Nifty Metal and Nifty Pharma were the top two gainers. On the other hand, Nifty FMCG and Nifty Auto were the top losers.   

Meanwhile, on NSE, a total of 45 securities have logged a new 52-week high, whereas only 15 securities logged a new 52-week low. 

 

Nifty on Tuesday witnessed a fall from grace movement, as after a good headstart i.e. above the 14,500-mark, the index slowly & gradually drifted lower and filled the gap by afternoon.  

However, in the second half of the trading session, a fierce sell-off was witnessed and soon, Nifty was down towards the 14,200 mark as COVID situation in certain states went from bad to worse and to break the chain, strict measures were announced. However, sanity returned, and a minor pullback was witnessed, which helped the index to trim some of its losses, but still, ended the day with a loss of 0.44 per cent i.e. below the 14,300 mark.   

The price action of the day has formed a sizeable bearish candle and it resembles a bearish belt hold pattern as the opening price becomes the highest point of the day and thereafter, a massive decline from the top leads to the formation of a large body.   

Nifty has breached its 100-DMA on a closing basis for the first time since the latter part of June 2020. Though it did not form a lower low as compared to its prior, the structure looks weak as, during this broad consolidation phase, there were a greater number of bearish bars as compared to the bullish bars. The size of the bearish bars is also larger. Hence, this clearly reflects that it’s a matter of time before Nifty moves below the lower end of this broad range.   

Supporting this notion is the fact that the RSI is below October 25 swing low on the weekly chart. It is below the latest swing low, and it is in a downtrend. In any case, if it closes below the 50 zone on the weekly timeframe, it would be quite damaging for the market technically. The MACD is bearish as it is below the signal line for the past five weeks. At the same time, the histogram shows that the bears are in control as the momentum is picking up on the downside. In addition to this, the ADX has moved above 25 for the first time since the latter part of February 2021. It is an indication of bearish strength. The negative movement indicator, -DMI is making higher highs and it is above the +DMI.      

Talking above the levels, 14,190 is key support on the downside and a breach of this level could take the index towards the levels of 13,900 on the downside. Meanwhile, on the upside, the level of 14,300-14,450 is likely to act as a resistance level.

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