RSI Entered The Bullish Zone

The unexpected measures taken by the RBI to increase cash flow in the market through its monetary policy delighted the equity market, which sharply rose above key levels. It was the biggest repo-rate cut in recent years by 50 bps to 5.5 per cent. The Nifty reclaimed 25000, levels. It gained by 252.15 points or 1.02 per cent and closed at 25003.05. The Realty index is the top gainer with 4.68 per cent. The Metal, Private Bank, FinNifty, and Auto indices gained over 1.5 per cent. The India Defence and Media indices closed with 1.70 per cent and 1.14 per cent declines. The Microcap index also closed with a minor loss. The India VIX is down by 3.00 per cent to 14.63 per cent. The market breadth is positive as 1673 advances and 1229 declines. About 95 stocks hit a new 52-week high, and 93 stocks traded in the upper circuit. Cochin Shipyard, BSE, HDFC Bank, Bajaj Finance, and Axis Bank were the top trading counters in terms of value.

The Nifty bounced by one per cent after the RBI’s monetary policy and tested the resistance line. It negated the previous day’s shooting star candle’s bearish implications. Interestingly, on the most positive day in the last few days, the volumes were lower than the previous day. It decisively closed above the 20DMA. Another interesting technical development is that the Bollinger bands were sharply contracted on a most bullish day. Apart from the Banks and Financials, interest rate sensitive sector line, Realty and Auto stocks were in the limelight. The Banknifty came out of its range and closed at a new lifetime high. It almost met our short-term targets. In any case, the Nifty closed above today’s high of 25030, which will be positive and can test above 25166 levels. The RSI entered the bullish zone. The MACD histogram shows a significant decline in the bearish momentum. The index has high probability of coming out of a consolidation. Stay positive and focus on interest rate-sensitive sectors for next week.

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