Market course hinges on Union Budget

During the last week, the market continued to trade within the range. The Nifty gained about 64.75 points or 0.55 per cent. The BSE Sensex lost about 0.5 per cent.

The broader markets outperformed the benchmark indices. The Nifty Midcap 100 index gained 1.4 per cent and Smallcap index rose by 0.9 per cent. The much broader index Nifty-500 also gained about 0.80 per cent. The Nifty Bank closed higher by 477 points.

Technically, the market is within the limits of 20 and 50 DMA. For the past few days, 50 DMA working as support and 20DMA as resistance.

On Wednesday, the Nifty closed above the 20th June High. But it could not sustain above the breakout level. Meanwhile, Nifty retraced almost 61.8 per cent of the fall from 3rd June to 19th June.

The price action on Thursday afternoon clearly demonstrated the distribution. Due to June expiry, On 25th and 26th June, huge short covering forced Nifty to move up. This upmove has given a price breakout with lower volumes.

The 11863-11625 levels acting as resistance and support in the past two weeks. As long these levels protected, market's range bound activity will continue.

As Union Budget, the major trigger point for the market and economy, is just another five trading sessions away, market may not give any major breakout.

There are a lot of signs showing distribution is happening in the market at every higher level. A set of indicators are also not given any bullish signal as the market is stuck in the range bound activity.

No indicator made a swing high or a positive divergence as of now. The RSI is still struggling to reach above the 60 levels. And the MACD histogram is showing some sluggishness among bears but, the signal line still below the MACD line.

If MACD line crosses above the signal, Nifty may once again try to move to higher levels. The 5-period Stochastic oscillator reached an overbought condition. The directional indicators +DI and +DI are narrowed.

These signal that the current range-bound action will remain. The market is witnessing profit booking on every rise and buying support at the bottom of the range.

The Union Budget may act as a major trigger point for the market direction. Market will have a positive bias above 11845 and it will turn bearish below 11600.

The interesting facts about the market in recent time are indicating a clear bearish stance. The market breadth is not improving and the number of stocks hitting new lows or new 52-week lows is increasing even on a positive day.

Over 700 stocks reached below face value level. And 70 per cent of the BSE 500 index stocks gave negative returns last month. The Nifty PE is still at a historical high and the market is waiting for surprising earnings growth.

If the earnings disappointment continues even in the next quarter, the market may react adversely. Any small negative proposal may dampen market sentiment. In this scenario.

it is advised to stay calm till the Budget and follow the direction after the budget.

(The author is a financial journalist and technical analyst. He can be reached at tbchary@gmail.com)