Nifty 10,075 last reliable support for market, long-term trend yet bullish
The trading pattern remains volatile. But, nervousness may be easing off as the market adjusts to the Punjab National Bank scam. The global trading pattern has been less volatile this week. However, India had its worst settlement in a while with the Nifty losing over 6.2 per cent going into settlement day. It’s still too early to judge if this is a big trend reversal, or an intermediate correction. The Nifty is down seven per cent from the all-time high of 11,170, recorded in late January. Of the three segments of players – Domestic institutions (DIs), retail investors and Foreign Portfolio Investors (FPIs), only DIs have been net buyers since the Budget. Option premiums spiked up through the settlement but the VIX is now dropping. However, this could be a function of the settlement being around the corner and it may just indicate likely short-covering. The long-term trend should still be counted as bullish. But the intermediate trend maybe negative. The 200 Day Moving Average (200-DMA) is at around 10,075-10,100, which would be the last reliable support for the bull market. The Index has bounced twice from 9,675, since December 2016. If the 200-DMA breaks, the 9,675-9,700 region would be the next support. The market broke down from 11,170. The Nifty next tested support at 10,585-10,600 from where it bounced on February 5. Then it fell to a intra-day low of 10,276 on February 6. The short-term trend is hard to read. The Nifty index has stayed above 10,275, but it has not been able to break out above 10,600. Trend-following signals suggest holding a sell on the Nifty with a stop at 10,700. Until the Budget, domestic institutions, FPIs and retail investors, had all been strongly bullish in calendar 2018. This resulted in a broad uptrend across most sectors.
Corporate earnings in Q3 have been decent enough. But the downtrend has been equally broad since Budget though smaller stocks have got hit harder.