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Time to wait for clear signals

Investors need to watch whether Monday’s bounce will sustain or fizzle out soon; India VIX rose 11.52% and closed at 20.60; It tested highest level after Sep2022; This is an indication that the market is poised for highly volatile moves

Time to wait for clear signals
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Last Thursday’s high, 22307, and Monday’s low, 21821, are critical resistance and support for now. Within this zone expect more volatile moves with higher intraday ranges

It was a highly volatile day for the equity market on Monday. After a weak opening, the benchmark indices made a smart recovery and ended on a positive note. NSE Nifty gained by 48.85 points or 0.22 per cent and closed at 22,104.05 points. The Pharma Metal and Realty indices gained 1.23 per cent to 1.77 per cent. Bank Nifty is up by 0.98 per cent, which is the main driver for Monday’s recovery. The FinNifty also gained by 0.86 per cent. The Nifty Auto is the top loser with 1.68 per cent, followed by the PSU Bank index with 1.23 per cent. All other sector indices closed with moderate gains or losses. The market breadth is negative as 1,500 declines and 1,134 advances. About 63 stocks hit a new 52-week high, and 141 stocks traded in the lower circuit. Tata Motors, ABB, Zomato, and Indegene were the top trading counters on Monday in terms of value.

Nifty, despite breaching the rising channel’s support in the morning session, showcased remarkable resilience. It staged a recovery of 310 points, closing at the day’s high and near the previous day’s high. The Home Minister’s comment that the market will test the new on June 4th sparked a significant spike. Notably, the Nifty also closed above the 20-week average. As previously mentioned, the index rebounded from the support zone of 21,710-21,860. It tested the 100DEMA of 21,821 on Monday and rebounded sharply. This recovery was largely driven by the strong performance of HDFC Bank and ICICI Bank, which together contributed about 78 points to the Nifty’s gain.

With the highest probability, the Nifty may form a base around the 21,700-22,400 zone. Before the election outcome, the index may give a directional bias. As the event risk is nearing, the India VIX is up by 11.52 per cent and closed at 20.60. It tested the highest level after September 2022. This is an indication that the market is poised for highly volatile moves. Let us wait and watch whether Monday’s bounce will sustain or fizzle out soon. Last Thursday’s high, 22307, and Monday’s low, 21821, are critical resistance and support for now. Within this zone expect more volatile moves with higher intraday ranges.

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

T Brahmachary
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