Nifty Adds Distribution Day; Metal and Banking Stocks Underperform

Nifty, -0.4%; Sensex, -0.4%; Nifty Midcap, -0.5%; Nifty Smallcap, -0.1%; Model Portfolio, +0.04%

Market Pulse: Confirmed Uptrend

Distribution Day Count: Four

Nifty opened flat this morning and turned negative in the opening hour itself. It traded in a very narrow range and found support near its 21-DMA. As the volume was higher compared to yesterday’s session, we will mark today’s session as a distribution day. Overall action in the broader market was also weak. But, there were pockets of strength (midcap IT and power stocks) which made fresh highs. On the sectoral front, Nifty FMCG and Pharma each closed around 50bps higher. On the flip side, Nifty Bank, Metal, and Auto closed 0.9–1.2% lower. The advance-decline ratio was in favor of decliners, as out of 2,260 stocks traded, 884 stocks advanced, 1,045 stocks declined, and the remaining closed flat.

We recommend a selective, patient approach to adding risk. It is crucial to continue to monitor the action for signs of health or crack in the market and leaders. If the index falls below its 21-DMA and adds a distribution day, we may change the market status to an Uptrend Under Pressure. Focus on quality ideas emerging out of sound bases with RS line at or near new highs while reducing exposure to stocks breaking below key support levels.

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