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Nifty Fails to Sustain Above its 50-DMA; Escapes a Distribution Day

Posted Date: March 24 2021
Today’s Action

Nifty, -1.8%; Sensex, -1.7%; Nifty Midcap, -2%; Nifty Smallcap, -2.1%; Model Portfolio, -0.9%

Market Pulse Uptend Under Pressure

Distribution Day Count: Six

Nifty opened about 100 points lower, taking global cues. As the day progressed, the selling pressure intensified and the market closed near the day’s low with significant losses. In the process, the index closed below its 50-DMA, which it had reclaimed yesterday. Nifty escaped a distribution day as volume was lower compared with the previous session. In the broader market, Nifty Midcap declined 2% and Small cap closed 2.1% lower.

On the sectoral front, barring Nifty Pharma, the majority of sectors closed in the red. Financial stocks dragged the index the most. Nifty PSU Bank, Nifty Pvt Bank, and Nifty Bank were the top decliners, closing 2.5–3.0% lower. Similarly, Nifty Realty, Nifty Auto, and Nifty Metal were down in the range of 2.5–3.5%. The advance-decline ratio was in favor of decliners. Of 2,285 stocks traded, 457 advanced, 1,430 declined, and the rest remained unchanged.

Market Status Overview

- Currently, the distribution day count stands at six. Though index reclaimed its 50-DMA yesterday, it failed to sustain above it and breached the same today.

- We will change the status to a Downtrend, if one more distribution day is added or if Nifty fails to reclaim its 50-DMA and market leaders show signs of deterioration in their price actions.

-Investors should consider booking profits in the stocks that have performed well and have advanced 20–25% from their ideal buy points. Even if the market undergoes a small correction, these stocks are more likely to consolidate and test their moving averages. Further, stocks slipping below their 50- and 200-DMA on above average volume should be sold. Consider exiting stocks that have declined 8% from your buy price.

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