Markets Surrender Gains in Sharp Sell-off; Banking Stocks Underperform

Nifty, -1.6%; Sensex, -1.6%; Nifty Midcap, -1.4%; Nifty Smallcap, -1.8%; Model Portfolio, -1.8%

Market Pulse Confirmed Uptrend

Nifty continued to march higher this morning. However, it pulled back sharply in the second half to close at the lows of the day. Nifty registered a distribution day as the volume was higher compared with yesterday’s session. On the way higher, the index found resistance near its 200-EMA. Nifty is still trading ~3% and 8% above its 21- and 50-DMA, respectively. On the sectoral front, barring FMCG, all other sectoral indices closed in the red. Selling was clustered in Bank and Financial Services stocks. Nifty Bank closed 4% lower. Nifty Metal, Pharma, and Realty closed with a cut of 2–3%. Market breadth remained weak. Of 2,123 stocks traded, 754 advanced, 1,074 declined, and the remaining traded flat.

The Indian market remains in a Confirmed Uptrend. However, things can change quickly due to high volatility. So, we will be watching the action closely with an eye to control risk and identify leadership; we will wait for solid entry points before buying. The O'Neil Methodology is a process to isolate leading stocks and buy them after a period of consolidation in order to be able to capitalize on an emerging trend. It is prudent to only invest in stocks that have strong fundamentals (i.e., good sales, earnings, margins, etc.) and that are breaking out of sound base structures on heavy volume.