Nifty forms Hanging Man

The equities led by financials rallied on Wednesday. The NSE Nifty’s frontline index closed at 19,444 points, with 47.55 points or 0.25 per cent gain. The Bank Nifty is up by 1.10 per cent, and the FinNifty is advanced by 0.92 per cent. The PSU bank and the Private bank index are up by 1.72 per cent and 1.26 per cent, respectively. The Media, Consumer durable indices gained by 0.68 per cent and 0.53 per cent, respectively. The Energy and FMCG indices were the top losers, with 0.57 per cent and 0.49 per cent, respectively. The India VIX is down by 0.17 per cent to 11.72. The market breadth is positive as the advance-decline ratio is at 1.47. About 161 stocks hit a new 52-week high, and 88 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, Axis Bank, and Adani Power were the top trading counters in terms of value.

The Nifty sharply bounced after the first hour of the trading. It has broken out of a rising channel. Still, it is below the previous week’s high. It rose by 105.45 points from the low. The bounce in the banks and financials led the benchmark indices to rally. Still, the volume is below the average. The ICICI Bank, Axis Bank, HDFC Bank, and SBI together contributed almost 50 points in Wednesday’s gain. Several stocks in the derivatives segment have seen long built up. After an over 100-point rally, the index consolidated in the last hour, forming a Hanging Man or a Doji candle. It shows indecisiveness on the moving candle. As we expected, the consolidation is below the 19,490 points and below the 20DMA. The 50DMA is now at 19,351.60 points. The distance between 20 and 50DMAs has shrunk to 178 points. This range is very crucial now. The 19,300 points was a strong support during the last seven days’ consolidation. The pattern looks like a consolidation during March. A breakout above the 19,482-530 levels will result in a resumption of an uptrend.

As the expiry on the cards, the implied volatility may increase. Even though the IV is at the historically lower range, stable at below 10, the option premiums were spurt during the day. Expect more volatility in the coming days.

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