Market in downward spiral after rally attempt in the week

The domestic equity market closed at the lowest level after August 2021. The Nifty closed below the previous week's close. The benchmark index, Nifty, declined by 262.70 points or 1.53 per cent and closed at 16245.35. Only the Nifty IT closed with a 0.14 per cent gain. The Auto and Metal indices are down by 3.55 per cent and 3.22 per cent, respectively. Realty, Media, and Midcap-100 indices down by 2 - 2.93 per cent. All the other sectoral indices were down by over a percentage. The VIX closed at 27.95 after hitting 29.92. The market breadth is extremely negative as 1512 declines and 553 advances. About 66 stocks hit a new 52 week high, and 95 stocks traded in the lower circuit. Tata Steel, Asian Paint, and Maruti are top trading counters.

The equity market tumbled further low on increased volatility. The Nifty declined below the previous week's low and formed a new lower low. As it breached the prior low of 16,203, the market is in a confirmed downtrend after a rally attempt during the week. The Nifty has closed below the 20th December low and confirmed the double top pattern breakdown on a weekly chart. This is the long-term bearish confirmation. During the last week, the index lost 2.48 per cent. The weekly RSI closed at 40 zone after July 2021. As the 200DMA is flattened, the trend indications are bullish at all. In case this long-term indicator also turns down, the Nifty target is at 15,250 zone. Before that, it may have psychological support at 16,000.

Currently, no sector is in the leading quadrant and losing momentum. The market breadth is negative. Many stocks continued to break the key support levels and damaged the technical structure. Importantly, more and more stocks have broken the bases during the last weeks. Leading, heavyweight stocks like HDFC also registered continuous new lows. Currently, the market is not conducive to holding stocks trading below 50 DMA and 200 DMAs. Now is the time to protect the capital and take out the portfolio profits.

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