Today’s Action:
Major indices fail to capitalise on positive start; midcap and smallcap stocks face heavy sell-off.
Daily Market Review:
It turned out to be a disappointing day at the bourses. India’s frontline indices gave away early gains, thereby snapping a three-day winning streak.
Both the Nifty and the Sensex finished with losses of 0.2%. However, they managed to escape distribution, due to lower trading volumes compared to the previous session.
Broader market indices encountered widespread selling, with Nifty Midcap and Smallcap tumbling 1.6% and 1.8%, respectively.
When the market goes down, there are always a couple of reasons that can be blamed for weakness in stocks. And this time around we have rise in crude oil prices, increase in U.S. bond yields and political tensions in the Middle East.
Besides, market participants seem to be favouring a cautious stance ahead of the crucial assembly elections in Karnataka. The state elections will be held on Saturday (May 12) and its results will be declared on Tuesday (May 15).
With foreign institutional selling continuing to outweigh domestic institutional buying, the Indian market is finding it extremely hard to overcome its previous highs.
Talking about sectoral performance, market bears did not spare even a single sector index today. All the indices closed in red, with Realty (-2%), Pharma (-1.8%) and Media (1.6%) stocks taking a heavy beating.
Market breadth remained in favour of losers once again, with a poor advance/decline ratio of 1:3. Out of 2,048 stocks traded on NSE, only 437 stocks advanced, 1,293 declined and 318 remained unchanged.
Our proprietary list of leading stocks, the MarketSmith India IND 47 index dropped 1.1% today, mainly on account of weakness in broader market.
So, what do we make of the current market condition?
The month of April was pretty good for the market as we saw many leading stocks breaking out into new high ground.
However, we have seen a dry up in the number of stock breakouts in the past two sessions. This is certainly a sign of weakness. Moreover, the Nifty Midcap and Smallcap indices breached their 50-DMA in today’s session.
That being said, the distribution day count, a measure that keeps track on recent institutional selling, sits at a comfortable level of two on Nifty and one on Sensex. Both the frontline indices are yet trading well-above their key support of 50- and 200-day lines. So, the market condition remains unchanged at a Confirmed Uptrend.
Current Outlook:
– Market environment conducive for purchases, but remain selective.
– Focus on fundamentally strong stocks breaking out of strong technical patterns.
– Stay disciplined and exercise sound buy and sell rules.
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