Investors Need To Focus On Low Beta Stocks

Expect a positive opening on Monday. The weekly closing is crucial for the medium-term directional bias. Watch the 23,900 and 24,240 zone for a short-term directional bias. As long as the support is protected, stay cautiously optimistic

NSE Nifty opened the week with a strong note, but declined below the key levels as geopolitical tensions escalated. The Nifty declined by 1.39 per cent, and BSE Sensex is down by 1.30 per cent. The broader indices, Midcap-100 and Smallcap-100 indices, declined by 0.90 per cent and 2.17 per cent, respectively. The Auto is the top gainer with 1.53 per cent on the sectoral front. The Media and Consumer Durable indices gained by 1.30 per cent and 0.32 per cent. On the flipside, the Realty is down by 6.56 per cent, and Bank Nifty slipped by 4.46 per cent. The Pharma and FinNifty are down by 2.57 per cent and 2.48 per cent, respectively. The market breadth is mostly negative. The India VIX is up by 18.49 per cent to 21.63. The FIIs bought Rs7,857.23 crore in this month. The DIIs also bought Rs13,741.45 crore worth of equities.

The markets are to open with a gap up on Monday as the ceasefire was announced, negating the probability of full-fledged war. The markets may feel joy as the war risks were averted.

Technically, the market is at a very crucial support area. The benchmark index, Nifty, has already breached its 200DMA support. It is almost at the 21st April gap area, and 20DMA. The 23,908-23,872 area of support is crucial now. As long as the Nifty defend this zone, it will continue to consolidate within the range of 23,900-24,600. The index has tested the 61.8 per cent retracement level (24,545) twice in the last two weeks, which is an upper limit of the consolidation for the next few days.

On a weekly chart, the Nifty has formed a bearish engulfing candle. At a swing high, this candlestick pattern is a sign of bearish bias. But, it needs a confirmation for its implications, by closing below it, next week. Currently, the index is holding three distribution days. In any case, the index breaches the crucial support area by adding two more distribution days will be negative. However, if the closes above the 24,275 will be positive and try to test the recent high.

The RSI is in the neutral zone on weekly and daily time frames. The MACD has given a fresh bearish signal on the daily chart. The -DMI just crossed the +DMI is a bearish sign. The ADX line is also declining, showing weakening trend strength.

The Geopolitical tensions turned into an unexpected ceasefire and are open for deliberations in a neutral venue. At the same time, some violations are a cause of concern. In this background, the market may feel a breather as the economic risks were avoided. Expect a positive opening on Monday. The weekly closing is crucial for the medium-term directional bias. Watch the 23,900 and 24,240 zone for a short-term directional bias. As long as the support is protected, stay cautiously optimistic. Above 24,240 points, the Nifty may test 25,600. A decisive close above 24,545 with higher volume will be positive, and the targets are open towards 25,000-25,300.

As the geopolitical events are taking new twists every hour, adopt a defensive approach. When emotions are playing a major role, sometimes technicals do not work. Focus on low beta stocks and high relative strength stocks. Avoid highly leveraged short positions.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)