Nifty Nosedives Below 17,000; Market Status Shifted to a Downtrend

Nifty, -4.2%; Sensex, -4.2%; Nifty Midcap, -4.3%; Nifty Smallcap, -2.4%; Model Portfolio, +0.2%.

Market Pulse: Downtrend

Distribution Day Count: Six

Nifty started the week on a weaker note and declined 2% on Monday. It also added a distribution day and we downgraded the market status to an Uptrend Under Pressure. The market rebounded from the lows during the week but failed to hold gains. We would like to reiterate our stance from the note on Tuesday where we advise investors not to be deceived by such rebounds. Today, Nifty gapped lower and selling pressure intensified as the day progressed. There were talks about uncertainty arising from the new COVID variant found in Africa. In the last hour, Nifty breached 17,000 and managed to close briefly above it.

Today, we changed the market status to a Downtrend as the distribution day count is at six. Nifty is trading below its 50- and 100-DMA and more than 8% off highs. Many leading stocks have breached crucial levels. During the week, barring Nifty Pharma (+2.3%), all sectoral indices closed lower. Nifty Auto (-8.4%) declined the most. Nifty Bank, Financial, FMCG, and IT closed 3–5% lower.

Stocks continued to take on technical damage with many moving deeper into their respective bases and breaking below logical support levels. Markets are currently not conducive for holding stocks below their 50- and 200-DMA. It is better to protect capital by staying on the sidelines than to take on risk. Although it is tempting to buy stocks on pullbacks during a market correction, one should wait for market conditions to improve and avoid catching a falling knife.

Looking forward, we will shift the market to a Rally Attempt if Nifty establishes a bottom and stays above today’s low (16,985) for three straight sessions. From there, we would prefer to see a follow-through day before shifting the market back to a Confirmed Uptrend.

Source: Google Image