Nifty Pares Losses to Close Flat; Financial Stocks Rally

Nifty, -0.1%; Sensex, -0.1%; Nifty Midcap, +0.5%; Nifty Smallcap, +0.6%; Model Portfolio, +0.5%

Market Pulse: Confirmed Uptrend

Distribution Day Count: One

Nifty started the session on a flat note and traded in a narrow range in the morning session. The index turned highly volatile and negative in the afternoon and made the day’s low of 17,254. However, similar to yesterday's action, there was some buying and the index closed flat for the day. Of the Nifty50 stocks, 56% advanced, led by Kotak Mahindra Bank(Nse) (+2.9%) and Bharat Petroleum (+1.6%).

It was a mixed reaction on the sectoral front. Financial-related indices closed 0.8-1.0% higher. On the flip side, Nifty IT, Media, Auto, Realty, and Pharma closed 0.3-0.7% lower. The advance-decline ratio was in favor of advancers. Of 2,006 stocks traded, 1,057 stocks advanced, 860 stocks declined, and the remaining closed flat.

Two distribution days expired last week, bringing the distribution day count down to just one. Further, Nifty is now trading near its all-time high and is placed above all its key moving averages. We would like the index to continue this trend. 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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