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Nifty Succumbs to Selling Pressure at Record Highs; Barring Nifty PSU Bank All Sectors Decline

Posted Date: November 25 2020
Today’s Action

Nifty, -1.5%; Sensex, -1.6%; Nifty Midcap, -1.7%; Nifty Smallcap, -0.9%; Model Portfolio, -1.8%

Market Pulse Confirmed Uptrend

Distribution Day Count: Two

Nifty opened at record highs and traded in a narrow range for the first 30 minutes. After which, the index saw a selling pressure which dragged index 300 points lower from intraday peak of 13,145. Today’s action qualifies as a distribution day, as the fall was on volume higher than yesterday's. 86% of Nifty50 stocks declined today, led by Eicher Motors (-3.7%) and Axis Bank (-3.2%).

Barring Nifty PSU Bank (+1.8%), all the sectoral indices closed in the red. Nifty Realty (-2.3%) declined the most, followed by Pharma (-2.1%) and Pvt Bank (-1.9%). Market breadth was in favor of decliners. Of 2,000 stocks traded, 645 advanced, 1,246 declined, and the rest remained unchanged.

Our strength lies in our risk management system. We are prudent when it comes to capital preservation. Our article on how to preserve capital: https://blog.marketsmithindia.com/know-how-to-preserve-your-hard-earned-capital/

Though we are in a Confirmed Uptrend, we need to be prudent and cautious while adding fresh positions, as Nifty is currently trading ~20% above its 200-DMA, which is rare. We expect some pullback in the market. However, a small pullback/consolidation is a constructive sign if Nifty holds its 21-DMA. It is advised to closely review the existing positions and book partial profits in stocks that are extended from their moving averages. We will look for leadership among some good stocks to push the market up. On the flip side, tracking distribution days is crucial. Accumulation of distribution days can halt the uptrend.

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