Nifty fell for the third consecutive week last Friday to close 0.91% lower at 16,945. This is the lowest point of the downswing which started from all time high of 18887, registered on Dec 1, 2022.
The formation of lower tops and lower bottoms has continued as Nifty closed below previous swing low of 16,972. Nifty is currently placed below its 20, 50, 100 and 200 days’ exponential moving average (EMAs). This indicates bearish trend on all time frames. In March itself, 50 days EMA crossed 100 days EMA on the downside, which indicates selling momentum on the short-term charts of Nifty index. At present 50 and 200 days EMA both coincide at 17,540 odd levels and that seems to have become a ceiling for the Nifty as far as intermediate trend is concerned. For the short-term, the recent swing high of 17,207 is expected to act as a resistance for the Nifty.
Immediate supports for the Nifty are seen at 16,747, which happens to be a major swing low registered on September 30, 2022. As per the Fibonacci theory, support for the Nifty is seen at 16,598, which is nothing but a 61.8% retracement of the entire upswing seen from June 2022 low (15,183) to all-time high of 18,887 (Dec 2022). Weekly relative strength index (RSI) and moving average convergence/divergence (MACD) both are sloping downward and showing a clear bearish trend. At present, more than 65% of the stocks from NSE500 are trading below their 200 DMA, which indicates weak breadth. Any reading above 50% signals bearish trend positionally.
The month of March has been the worst month for equity markets, if we were to go by the history of last 29 years. Nifty has given an average monthly return of -1.43%, which is the lowest amongst all the months.
In 2021, equities had outperformed all other asset classes with the Nifty yielding more than 24%. And in 2022, the dollar Index and bond yields had outperformed and equities remained under pressure.
Looking at current global setup, it seems that CY2023 could be the year of precious metals, especially gold. Indian gold has broken out from the last 2.5 years consolidation by registering fresh all-time highs. There is a negative correlation between gold prices and bond yields. US bond yields have fallen sharply in this month and reached below their long-term moving average of 200 days. So, gold is likely to outperform.
The coming week is a holiday shortened week with the markets closed Thursday for Ram Navami. The March derivative settlement, therefore, will now happen on Wednesday which will also be the last day for this financial year’s delivery trades. However, buying could emerge Friday as investors and window dressers polish up their stocks for the financial year closing.
The writer is a market veteran with 34 years of experience in the capital markets. He retired from HDFC Securities as Head of PCG & Capital Market Strategy
This article taken by livemint.com
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