Nifty Adds a Distribution Day; Auto Stocks Lead, BFSI and Metal Lag

Posted Date: January 22 2021
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Weekly Action

Nifty, -0.4%; Sensex, -0.3%; Nifty Midcap, -1.3%; Nifty Smallcap, -0.7%; Model Portfolio, -2%.

Market Pulse: Confirmed Uptrend

Distribution Day Count: Five

Weekly Market Review

Nifty remained volatile during the week. It started the week on a negative note but rebounded sharply on Tuesday and Wednesday and hit a fresh all-time high. However, it staged a downside reversal in the last two trading sessions of the week and added two distribution days, taking the count to five. During the week, among sectoral indices, only Nifty Auto (+3.3%) and IT (+0.5%) closed in the green. On the flip side, Nifty Metal (-6.3%) was the top loser. Nifty Bank, Pharma, and Realty closed 3.0–3.5% lower. Today, market breadth was skewed toward decliners. Of 2,211 stocks traded, 514 advanced, 1,391 declined, and the remaining were unchanged.

With indices above relevant intermediate-term moving averages, we will continue to look for leadership-quality growth names to form entry points. At the same time, the distribution day count is at five and many stocks have breached their 21- and/or 50-DMA. In this type of market, the message is to stay the course. We will continue to monitor the market and look for signs of strength or weakness. During pullback/consolidation, it will be crucial for Nifty to hold its 21-DMA. It is advised to closely review the existing positions and book profits in stocks that are extended from their moving averages and/or showing technical weakness. Also, tracking distribution days is crucial as a rise in distribution days can halt the uptrend.

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Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.For more information, see our Legal disclosures here.
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