Markets may rally to new highs, but in limited range

The benchmark index rallied for the third straight week and ended a new high. NSE Nifty gained by 1.5 per cent, and BSE Sensex was up by 1.22 per cent. The broader market indices continue to underperform.

The Midcap gained by 0.29 per cent and the Smallcap down by 0.47 per cent. Metal is the top gainer with 7.02 per cent, followed by the auto index at 4.61 per cent. On the flipside, the Private Bank index was down by 0.38 per cent, and FMCG declined by 0.04 per cent. The market breadth is positive throughout the week. The India VIX declined by 6.54 per cent to 11.96. The FIIs bought Rs22,403.72 crore, and the DIIs bought Rs24,211.50 crore worth of equities. The Nifty continues to scale new highs. The Nifty rallied by 249.85 per cent from the Covid-2020 low.

The current bull run since March 2023 is the sharpest one, with no major corrections. In the last 18 months, the benchmark index has climbed over 56 per cent. During this period, only one of 6.85 correction occurred in October 2023. Currently, India’s market capitalisation (mcap) has risen to $5.71 trillion. In any terms, the current market condition is in a strong bullish trend. In any time frame, there is no weakness is visible. Several evidence show the trend is overstretched. However, all smaller declines were taken as opportunities for fresh buying. Several bearish patterns failed to get confirmation for their implications. The seasonality of September’s weakness for the past 15 did not repeat this year. The index has closed above the prior bar’s high in the last four months and three weeks. This shows the solid strength in the trend. Interestingly, the volumes have been declining for the last three months.

We mentioned a year ago that the Nifty can test 26,276 by the first quarter of FY 2025-26. This target is a 100 per cent extension of the March 2020 to October 2021 swing. This first phase of the rally is 19 months old. After 20 months of consolidation, the index broke out and has now exactly met (26,277) its target on Friday.

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