Markets banking on bank stocks

The equity markets witnessed a huge volatility on Monday. The NSE Nifty moved in 273 points range, and settled on a flat note with just 10.50 points, settled at 18,125.40 points. The banks mitigated the huge fall in the market. The Bank Nifty up by 868.75 points and closed at 41,192.40 points. Fin Nifty gained by 1.33 percent. All the other sectoral indices closed with a negative bias. The Nifty Realty and Smallcap-100 indices were the top losers with 2.77 per cent and 2.34 per cent. Nifty Auto declined by 1.80 per cent, and IT index was down b 1.10 per cent. Midcap-100 declined by 1.70 per cent. The broader market breadth is extremely negative as 1,477 declines and 535 advances. About 71 stocks hit 52-week high, and 169 stocks traded in the lower circuit.

As we expected, the NSE Nifty has taken the support at 20DMA for the day. It also tested the prior breakout level. It formed a lower low weekly candle for the first time after July at the beginning of the week. But, the recovery of 157 points the day's low and formed a hammer candle. Monday's candle retraced more than 50 per cent is a bullish sign, which shows the buying support from the low. On a 75 minute chart, the RSI has formed a hidden positive divergence. The price has formed a lower low, and the indicator has formed the parallel bottom. In any case, the RSI closes above 50 level on a 75 minutes bar, and the Nifty can test 18,272 points. Monday's low 17,968 level is crucial as it is a cluster of supports. The 20 DMA is currently placed at 17,966 level. As long as this level is protected, better to avoid taking short positions. Below this level, the 61.8 per cent retracement level of the prior swing is placed at 17892. We cannot forecast a decline more than this. Only the banking sector is protecting the market now. For this monthly closing 17892-18332 zone is crucial for a decisive trend. Above 18332, it will resume up move towards the previous high. Monday's recovery from the low should attract the follow-through, and it should be broader participation by all sectors.

(The author is financial journalist, technical analyst, family fund manager)