Time to stay on side-lines amid escalating volatility

The Euphoria is not at the expected level as the indices were not sustained at higher levels, and the gain is not at the expected level. The Nifty gained by 429.40 points or 1.92 per cent and closed at 22828.55

All the sectoral indices were positive. The Nifty Metal index was the top gainer, with 4.09 per cent. The Microcap, Consumer Durables, and CPSE indices gained over three per cent. The Commodities, Smallcap, and Energy indices gained over 2.5 per cent. All other indices advanced by 0.69 per cent to 2.5 per cent. The India VIX is down by 6.17 per cent to 20.11. The market breadth is positive as 2381 advances, and 492 declines. About 35 stocks hit a new 52-week high and 160 stocks traded in the upper circuit. HDFC Bank, TCS, Infosys, ICICI Bank, and BSE are the top trading counters in terms of value.

After opening with a 235-point gap up, the index filled the Monday Gap area. But, it did not sustain at the higher levels. The index closed at just above 50 per cent of the recent fall. It is still below the 20 and 50DMAs. During the last four trading sessions, the index has witnessed huge volatility. It opened with a huge gap down on Monday and closed with a huge gap up. After the opening, the index traded within the range. The volumes were a little above the prior day’s volume and above average. The index has formed an open low and a long upper shadow candle. On a weekly chart, it formed a strong bull candle and faced resistance at a 10-week average. The weekly volumes were higher in the last ten weeks. The Nifty filled the Monday gap area, too.

As China again imposed retaliatory tariffs on the USA, the trade war will be an interesting global event now. Negotiations with various countries are crucial now. Wait for the developments in the next three months. The US may extend the tariff implementation to a 90-day pause. Volatility will increase further in the coming days. All asset classes are facing volatility. Stay on the side-lines for now.

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