Nifty Breaches 50-DMA; Economic Survey Pegs India’s Growth at 11.5% in FY22

Weekly Action

Nifty, -5.1%; Sensex, -5.3%; Nifty Midcap, -3.5%; Nifty Smallcap, -2.3%; Model Portfolio, -2.2%.

Market Pulse: Uptrend Under Pressure

Distribution Day Count: Six

Weekly Market Review

Nifty was down in all the five trading sessions of the week. It breached its 21-DMA on Monday, and the selling intensified with high volatile moves as the week progressed. It breached its 50-DMA on Friday, as it fell sharply in the last hour of the session. The Union Budget will be presented on February 1. As with the big events, volatility index India VIX rose 4% to over 25. Today, all the sectoral indices closed lower except financial related sectors. Today's action qualifies as a distribution day as the fall was higher than 0.2% on volume that was higher than the previous session. The distribution day count has now increased to six.

During the week, all the sectoral indices closed in the red. Nifty IT (-6.9%) and Auto (-6.7%) were the top losers. Remaining sectors declined 2-6% lower. Today, market breadth was skewed toward decliners. Of 2,215 stocks traded, 858 advanced, 1,022 declined, and the remaining were unchanged.

On Wednesday, we downgraded the market status to an Uptrend Under Pressure as 1) Nifty was trading below its 21-DMA. 2) Distribution day count was at five. 3) Nifty dropped more than 5% from its recent high. 4) Overall market breadth was weak. We will continue to monitor the market and look for signs of regaining strength or further weakness. 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. We will change the status to a Downtrend, if the number of distribution days increase and leadership remains weak. On the flip side, the status will be back to a Confirmed Uptrend if Nifty retakes 14,754 (high during the recent rally).