Nifty ends last week flat, Sensex falls amid low risk appetite; underlying bearish trend emerges in stocks

Nifty ends last week flat, Sensex falls amid low risk appetite; underlying bearish trend emerges in stocks

By Anand James

Nifty 50 finishing the week with almost a flat close (just 0.2% decline) masks the fact that the ending note of the week was decidedly bearish. The bearishness was writ large among stock Futures, with 82% of them showing either short build up or long unwinding. Meanwhile 20% of the Nifty 50 constituent stocks fell below their respective low of 1st June 2023, Nifty’s recent low, but only 16% of small caps fell below such lows. Among the NSE 500 stocks, 84% are still above 200 DMA, and 69% are above 60 DMA, so that major trend has not yet broken down, but 50% of them have fallen below the 20 DMA.

NSE Nifty 50 meanwhile, having closed below its 50 DMA as well as below the July’s consolidation which had acted as a firm support until now, default trajectory aiming 18300, discussed last week, appears well in motion. Upside hopes rest on the ability of 19170, the 61.8% retracement of the uptrend since June. Intermediate support is seen at 18824, the 38% retracement of larger up move since March. VIX continues to be benign at 12.08, and below the level we saw when similar lows in Nifty was attempted last week. In other words, though a significant number of stocks have broken down, the fear factor is still not high enough to warrant an outright collapse.

Meanwhile USDINR has disappointed again. Multiple days of close above 83 had given us the hopes that RBI intervention is less likely that USDINR would finally take flight beyond 83.26, a level that it tried to conquer, albeit unsuccessfully in almost every month since October 2022, when we saw the record peak first. The rejection trades swung prices lower with 82.45 arresting the declines so far. This region is expected to pivot USDINR for a while, before setting 82.2-82.7 as the likely breakout region again.

(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)