Nifty, -0.5%; Sensex, -0.2%; Nifty Midcap, -1.7%; Nifty Smallcap, -3.4%; Model Portfolio, -3.1%
Market Pulse: Confirmed Uptrend
Distribution Day Count: Four
Weekly Market Review
Nifty hit new highs for three consecutive sessions since the start of this week. Today, the index gapped lower, below 16,400. However, it was a knee-jerk reaction and the index recovered around 150 points in the first hour itself. Today was a volatile session with Nifty moving in the 16,400–16,500 range during the day. We will mark today’s session as a distribution day as the loss was more than 0.2% on volume higher than in the previous session.
During the week, the broader market remained weak. Midcap and smallcap underperformed the index and declined 1.7% and 3.4%, respectively. Barring Nifty FMCG (+4.8%) and IT (+2%), all sectoral indices closed lower for the week. Metal (-8%) was the top loser. Nifty Auto, Bank, Energy, and Pharma closed 1.5–3.0% lower. Today, the advance-decline ratio was in favor of decliners. Of the 2,016 stocks traded, 368 advanced, 1,606 declined, and the rest remained unchanged.
Currently, the distribution day count stands at four. Nifty is trading less than 2% below its high. If the index adds a couple of distribution days, stages a reversal, or breaches its key moving averages, we may change the market status to an Uptrend Under Pressure. Reducing exposure to stocks breaking below their 21- or 50-DMA on higher volume is important.
Over the last few sessions, the broader market seems to have fallen out of favor. Some stocks are showing poor price behavior, resulting in minor damage to their charts. Shakeouts happen and are a normal course for growth stocks. But we do not want weak action to persist. We recommend being selective when investing in new stock.