Nifty Closes Below 17,400; Metal Stocks Nosedive

Nifty, -1.1%; Sensex, -0.9%; Nifty Midcap, -2.2%; Nifty Smallcap, -1.7%; Model Portfolio, -2.2%.

Market Pulse: Confirmed Uptrend

Distribution Day Count: Two

There is no doubt that the fright and delight of rollercoasters get the heart racing. Today, it was a rollercoaster ride for the Nifty. The benchmark gapped lower, but the lows were bought, and the index rebounded more than 150 points from there. After moving above 17,600, there was a sharp fall, and Nifty breached 17,400. Since the start of August, Nifty has found support near its 10-EMA many times. Today also, Nifty briefly breached 10-EMA but closed just above 10-EMA (17,390). Not only the Indian equity market, but the sell-off was sharp in Europe and U.S. futures. Evergrande’s fear was the talk of the town today.

On the sectoral front, barring Nifty FMCG (+0.7%), all other indices closed lower. Nifty Metal nosedived 7%. Tata Steel closed 10% lower. Nifty Bank, Realty, Auto, Pharma, and Financial Services closed 1.5–2.5% lower. The advance-decline ratio was in favor of decliners. Of 2,023 stocks traded, 432 stocks advanced, 1,569 stocks declined, and the remaining closed flat.

The distribution day count currently stands at two. Further, Nifty is now trading above all its key moving averages. After a fall today, we would like the index to continue trade above key moving averages. After such a sudden rally, one must also be prepared for some mild profit booking. In the process, 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.

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