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Nifty Stages Upside Reversal; Adds Another Distribution Day

July 28 2021
Today’s Action
Nifty, -0.2%; Sensex, -0.3%; Nifty Midcap, -0.5%; Nifty Smallcap, -0.5%; Model Portfolio, -0.3%
Market Pulse:  Confirmed Uptrend
Distribution Day Count: Four
Nifty opened the session on a flat note and selling pressure quickly gripped the markets. The index declined more than 250 points from the day’s high to make an intraday low of 15,513. However as the session progressed, some buying was observed at the lower levels, which pared most of the losses. Intraday the index breached its 50-DMA, but found support around the level and reclaimed it. Today’s action qualifies as a distribution day as the fall was over 0.2% with volume higher than the previous session. Among Nifty50 stocks, 54% closed lower. Kotak Mahindra Bank (-2.7%) and Dr. Reddy's Laboratories  (-2.3%) were the major decliners.
Barring Nifty Metal (+1.2%) and IT (+0.2%), all sectoral indices closed lower. Nifty PSU Bank (-1.9%) was the major decliner, followed by Nifty Auto (-0.9%) and Realty (-0.8%). The advance-decline ratio was in favor of decliners. Of 2,277 stocks traded, 732 stocks advanced, 1,206 stocks declined, and the remaining closed flat.
Two distribution days were added in consecutive sessions, raising the distribution day count to four. Nifty is just 0.3% above its 50-DMA. If the index breaches the 50-DMA on higher volume and adds a couple of distribution days, we may change the market status to an Uptrend Under Pressure. We continue to recommend a selective approach to increasing risk. Focus on quality ideas emerging from sound bases with RS line at or near new highs while reducing exposure to stocks breaking below key support levels.
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