After the relentless rise in the month of April and May this year market is finally showing some correction, thanks to our domestic problems such as currency depreciation, reform slowdown and general election next year.
Nifty has corrected 5% in the last 20 days and is witnessing selling pressure at higher levels beyond 6100. Defty (dollar nifty) has corrected 8% in last 20 days due to massive correction in INR vs USD.
Though the upside seems fairly capped at 6100, the downside also seems to be capped at 5800. As on 7th June the Nifty closed at 5880. Below are the indicators which are suggesting limited downside for Nifty below 5800 in the current month. However in case INR blows out completely or some grave news comes out of Europe or US, the 5800 level could get broken and the market could slide down significantly as the major support would have got broken.
- Nifty 200 SDMA (Simple Day Moving Average) at around 5800 levels.
- 5800 has the highest amount of open interest of around 6.1 million contracts in June series.
- RSI (Relative Strength Indicator) at 27 suggest oversold territory in short term. Nifty could bounce back from current levels or after falling a bit more.
- The 50% Fibonacci retrenchment of the entire rally from 5500 to 6200 come at around 5850.
- Large Banking stocks, L&T, Reliance and other large cap stocks which are having high weight age in the index appears oversold in short term and attractive from valuation perspective.
- The rupee depreciation has made good quality large cap stocks relatively more attractive from FIIs perspective.
The support of 5800 is decisively broken today. Next support at 5700 to be watched carefully. Individual stock cracking down 10 - 20% every day which is not very comforting.ReplyDelete