Today’s Action:
Nifty rebounds after three straight losses; midcap and smallcap stocks outperform.
Daily Market Review:
Frontline indices maintained positive momentum throughout the day, ending their three-session losing streak.
The Nifty and the Sensex closed with gains of 0.8 and 0.9%, respectively. Volumes picked up on both the composites.
Against the backdrop of rising crude oil prices and growing inflation concerns, the Reserve Bank of India increased key interest rate by 25 basis points to 6.25%. This marked the first rate hike under the NDA government.
While the RBI interest rate hike took many analysts by surprise, the bank’s neutral stance on liquidity certainly emerged as a positive.
Broader market indices heaved a major sigh of relief after a six-session sell-off left investors dejected. The Nifty Midcap and Smallcap indices gained 1.4% and 1.7%, respectively.
The overall market breadth turned bullish, as gainers outnumbered decliners in a ratio of 11:5 on the NSE.
On the sectoral front, strength was witnessed across the board as all sector indices moved higher. Nifty PSU Bank (+2.5%), Metal (+1.9%), Auto (+1.5%) and Realty (+1.5%) were the top gainers.
Our proprietary list of leading stocks, the MarketSmith India IND 47 index advanced 2.2%, led by gains in smallcap and midcap stocks.
Today’s strong session did not have any impact on the Indian market condition. The market remains in an Uptrend Under Pressure for now. While both key indices are only 3-4% away from their all-time highs, there is still some strong overhead resistance. For the Nifty, 10,700-10,800 levels serve as major resistance. On the downside, the 50-day line serves as a crucial support level for frontline composites.
While key indices are holding up well, the year so far has been painful for broader market indices. The midcap and smallcap benchmarks have sold-off 16% and 23% from their January highs and are currently in a Downtrend.
For now, the Nifty Smallcap index seems to have found support above its 52-week low of 6938.50. That said, we would wait to see if the index is able to hold above its recent bottom for three straight sessions before moving the index to 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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