Daily Big Picture – Market Scripts Strong Comeback

Today’s Action:

Major indices post solid gains; Nifty reclaims 50-DMA on higher volume.

Daily Market Review:

Key benchmarks made a strong recovery, driven by a surge in buying interest in the final hour of today’s session.

Both the Sensex and the Nifty traded in positive territory before notching gains of 0.9% and 0.8%, respectively. Today’s strong move pushed the Nifty back above its 50-day line. Volumes were higher on both indices. 

In the broader market, investor interest was muted as the Nifty Midcap (-0.43%) and Smallcap (-0.02%) indices finished lower.

Strength was seen mainly in the Nifty IT (+2.3%), PSU Bank (+1.7%), Pharma (+1.7%) indices. IT heavyweights came to the party as both Infosys and Tata Consultancy Services scaled fresh 52-week highs. On the flip side, Nifty Auto (-1.7%) and Realty (-0.7%) indices closed lower.

The MarketSmith India IND 47 index, our proprietary list of the top 47 stocks in chart and fundamental characteristics gained 0.2% today, faring relatively better than the broader indices.

The overall market breadth remained in favour of losers. Out of the 2,049 stocks traded on the NSE, 800 advanced, 916 declined and 333 remained unchanged.

Also, there was no respite in the bond market as the 10-year bond yield rose 0.3%.

The Indian stock market has come under selling pressure in recent times due to weakening macro conditions. Rising fuel prices and a depreciating rupee have pushed the country’s 10-year bond yield to 7.87% – the highest level in about 3.5 years. Amid inflation concerns, market participants are now anticipating an increase in key interest rates.

To counter fuel price hikes, the Indian government is considering levying a windfall tax on oil producers. Reacting to the news, shares of crude oil major, Oil & Natural Gas dropped 4.4%.

Talking about market direction, the Indian market continues to be in an Uptrend Under Pressure. The distribution day count stays unchanged at four on the Nifty and two on the Sensex.

After closing below its 50-day line for the first time since April 11 yesterday, it took just one session for the Nifty to get back above it.

While frontline indices are down 5-6% from their all-time highs, broader market indices have corrected 15-20%. Both Midcap and Smallcap indices have seen massive selling pressure over the past five weeks. The Nifty Midcap is currently in a Downtrend. However, the Nifty Smallcap has managed to hold above its recent bottom for three straight sessions and is now in a Rally Attempt.

Current Outlook:

– Be cautious with new purchases

– Form a defensive game plan for your portfolio

– Stay disciplined and exercise sound sell rules

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