Any further rally will attract profit booking

NSE Nifty scaled a new all-time high and ended above the 24,000 level. The Nifty traded in a massive 824 points range and closed with 509.50 points or 2.17 per cent gain. The BSE Sensex was up by 2.36 per cent. The Midcap-100 and Smallcap-100 underperformed with just 0.56 per cent and 0.45 per cent gains. On the sectoral front, Nifty Energy is the top gainer by 3.29 per cent, followed by 2.73. Reliance Industries, gained by 7.56, contributed a majority to the rally. On the flip side, Nifty Realty is down by 2.40 per cent, and the Media index declined by 2.32 per cent. The market breadth is primarily negative as the declines outnumbered in three sessions. The India VIX is up by 4.72 per cent to 13.80. After selling in the first half of the month, the FIIs turn net buyers by the end of the month. They bought Rs2,037.47, and the DIIs bought Rs28,633.15 crore during the last month.

The unstoppable rally in the equity benchmarks indices has reached an overextension zone, a potential red flag for investors Now, the index is 6.25 per cent above the 20-week average and 4.75 per cent above the 10-week average. Such a significant deviation from the averages is a sign of an overextension of the rally, which could pose risks for investors. The weekly RSI (72.37) is also in the overbought condition, further indicating potential risks. On a daily chart, the Nifty formed a bearish candle on Friday after four symmetric bullish candles. In all trading sessions in the last week, the index has moved over the 200-point range. The index is 2.95 per cent and also 700 points from the 20 DMA. The upper Bollinger band’s vertical expansion shows the impulsive nature of the rally. The daily RSI is reacting from the near 70 zone. The daily MACD histogram also shows a negative divergence, which is more valid.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)