Equities see sharpest decline in recent times

WHAT WENT WELL

♦ PSU Bank index is top gainer

♦ Nifty Auto increases 0.21%

♦ Smallcap indices up 0.26%

♦ 40 stocks hit a new 52-week high

♦ 53 stocks traded in upper circuit

The benchmark indices declined for the third straight session. The Nifty declined by 68.10 points or 0.34 per cent and closed at 19674.25. The PSU Bank index is the top gainer with 3.51 per cent. The Nifty Auto and Smallcap indices are up by 0.21 per cent and 0.26 per cent, respectively. All other indices closed negatively.

The Nifty Pharma is the top loser with 1.55 per cent. The other sector indices declined moderately. The market breadth is negative the entire week. About 40 stocks hit a new 52-week high, and 53 stocks traded in the upper circuit. HDFC Bank, Reliance and Canara Bank were the top trading counters today.

Equities witnessed a sharpest decline in recent times. On a weekly basis, the Nifty has formed the most bearish candle after June 2022 (points and percentage-wise). This is also a sharp decline after Feb 2023 (percentage-wise). All the sessions during the week closed with negative bias. It closed at the low of the week.

The index is now below the 20DMA, which means the mean reversion is completed. We can expect the market to consolidate or contract for some time. If the 50DMA, 19626, and the prior breakout level of 19584 are protected, we can expect the consolidation below 19900. The gaps in the prior upside swing were filled in the last three days. There are three more gaps in the June last week.

The RSI declined below 50, and the MACD has given a fresh bearish signal. Today, the volumes were lower. The index retraced more than 55 per cent of the previous 11-day upside move. As the Nifty experienced two impulsive swings, expect a cool-off period.

The market will react adversely if there is any event risk, like a general election announcement. Staying with a lighter position size is a key strategy now. With prudent risk and money management, protect the capital and profits.

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