Nifty Reclaims 21-DMA; Banking and Metal Stocks Outperform

Nifty, +1.2%; Sensex, +1.2%; Nifty Midcap, +1.6%; Nifty Smallcap, +1.7%; Model Portfolio, +1%

Market Pulse: Rally Attempt

Nifty opened flat, but gradually moved higher, and closed near the day’s high. As gains were less than 1.5%, we will not consider it a follow-through day. Note that even though market breadth has improved and Nifty reclaimed its 21-DMA, volumes were comparatively lower on Nifty and the index is still below its 50-DMA. Today, chemical-related stocks were in momentum, many closing more than 10% higher. On the sectoral front, all sectors closed in the green. Nifty Metal (+2.7%) was the top gainer, followed by Nifty Bank (+1.5%). The advance-decline ratio was in favor of advancers. Of the 2,249 stocks traded, 1,325 advanced, 548 declined, and the rest remained unchanged.

Looking ahead, we would prefer to see a follow-through day before shifting the market to a Confirmed Uptrend. A follow-through day is a solid up session, generally a 1.5% or higher gain, with volume higher than the previous day. Should this occur, the focus will be on ideas breaking out of early-stage base patterns and showing the best relative strength with good accumulation. On the flip side, Nifty is still below its 50-DMA and about 5% off its last high. So, if it breaches its recent low of 14,151, the market will be moved back to a Downtrend.