Banks, Financial Push Market Higher; Nifty Bank Reclaims 200-DMA

Nifty, +0.9%; Sensex, +1.1%; Nifty Midcap, +0.8%; Nifty Smallcap, +0.7%; Model Portfolio, +0.5%

Market Pulse Rally Attempt

Nifty gapped higher this morning and was able to sustain the gain during the session. The gains were led by Bank and Financial Services stocks. The sentiment was positive toward these stocks as HDFC Bank reported a strong set of Q2 FY21 numbers. Bank Nifty closed more than 3% higher and reclaimed its 200-DMA. FMCG stocks also helped the market trade higher. There was weakness in Pharma, Auto, and IT stocks. Broader market was underperforming in the first half but gained strength in the second half, with Nifty Midcap and Smallcap closing 0.7% higher. Of 2,220 stocks traded, 1,070 advanced, 740 declined, and the rest remained unchanged.

Looking forward, we would prefer to see a follow-through day before shifting the market to a Confirmed Uptrend. A follow-through day is a solid up session, generally a s1.5% or higher gain, with volume being higher than the previous day. However, we are positive on the general market as we can find further evidence of good behavior in leaders that have already broken out; for example, HDFC Bank, Reliance, Infosys, and Asian Paints. During this time, one should look for stocks with quality fundamentals, RS line trending higher, and breaking out from consolidation areas.