Nifty above all key long-term moving averages

Another buoyant and impulsive week ended with over two per cent gains for the second straight week. NSE Nifty traded in the 621.85 points and ended with 455.1 points or 2.02 per cent gain. BSE Sensex also gained by 2.02 per cent. The broader market indices, Nifty Midcap-100 and Smallcap-100, advanced by 0.07 per cent and 1.0 per cent. All sectoral indices closed higher during last week. The Media index is the top gainer with 4.7 per cent. The Metal and PSU Bank indices gained by 3.9 per cent and 3.5 per cent, respectively. The market breadth is almost neutral last week. The India VIX is up by 5.88 per cent to 21.71. It touched the 24.21 on Thursday. The FIIs sold Rs34,459.88-crore worth equities, and the DIIs bought 40,797.89 crore worth of stocks this month. Last week, the Nifty achieved a significant milestone, scaling a new lifetime high at 23,026.40 points. This is a strong indicator of the market’s positive sentiment and suggests a low probability of a change in the government. The market had already factored in the pre-election rally, and the Nifty’s surge after the RBI’s dividend announcement further boosted sentiments. The economists expected that the fiscal consolidation would improve. Soon after the RBI’s dividend announcement, the Nifty rallied 370 points on Thursday. In the most bear case scenario, the Nifty may test on the 1st December 2023, a high of 20,291 points, and fill the huge gap. It is almost 61.8 per cent retracement level (20,437pts). During major event risks like General Elections Day, the market reacts impulsively. However, it’s important to remember the first principle of Charles Dow’s Theory- the market discounts everything. This means that all the information about a company or, an industry or external risk, is already reflected in the stock price. As stated above, the market already discounted the outcome. The VIX is at 21.71, which indicates higher volatility, which means the Nifty can move 4.65 per cent on either side.

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