Nifty support seen at Budget day low of 17353; move below 17050 signals multi-month downtrend

Nifty support seen at Budget day low of 17353; move below 17050 signals multi-month downtrend

By Anand James

As we head into the March series, the signals from F&O space are decidedly bearish. Even though Nifty closed almost 150 points above the budget low, 52% of F&O stocks had fallen below their respective budget day lows. Such stocks were the most from metal, consumer discretionary and FMCG sectors. 66% of the F&O stocks are trading below their respective 50DMA as well.

How potent is this construct? A negative bias is not enough for a bounce back. Small caps have been hurt the most with 63% of the small cap index under 200 DMA already, even though Nifty is still 100 points above its 200 DMA. In fact, while more than 56% of NSE 500 stocks are trading below this key benchmark, more than 83% of NSE 500 stocks are trading below budget day lows. Meanwhile, about 30% of the mid cap index stocks are still trading above the 1 Dec 2022 peaks, when Nifty last hit a record peak. In other words, while we are not extreme enough to force a vertical bounce back, fear appears to be moving into extremes.

With these in perspective, let us look at how Nifty is poised to trade in the first few days of the next week. The key level that will be in focus, early on will be 17,353, the budget day’s low, also signified by the close proximity of 200DMA at 17,368. The closest barrier on the higher side will be 17,620, the reaction high of last week. The major level that we will be eying before Nifty slips into a multi month downtrend would be 17,050, while a weekly close above 17,740 will be key for short covering prospects.

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