After a weak closing on Dow Jones, traders in the Indian market experienced a great amount of volatility in Nifty.
Since yesterday, we have been observing volatility in the Nifty and mid-to-small cap stocks on account of a rebound in the U.S. dollar index and U.S. 10-year bond yields. Although Dow Jones led a modestly favorable opening for the U.S. market yesterday.
But during the rest of the day, the larger market consistently applied to sell pressure to every rise in the U.S. market. One at a time, Dow Jones prices rose by about 0.5%. But the rising 10-year bond yields and the U.S. dollar index arrested intraday recovery.
The broader market’s intraday selling pressure caused all of the U.S. benchmark indices to settle at the day’s low. The Dow Jones fell 0.63%, S&P 500 fell 0.89% and the Nasdaq fell 1.12% sharply on the lows of the day.
This week’s NIFTY movement
If we look at the performance of the Indian stock market since the start of the week on Monday, we can see that both benchmark indices NIFTY 50 and BSE SENSEX reached a new 52-week high on Monday. Stocks in the technology and metal industries led yesterday’s movement. Despite the significant movement in the benchmark indices, there was no enthusiasm or follow-up buying in the broader market.
The rise in the volatility index (VIX) and weakness in the rupee against the U.S. dollar, which dominated the majority of sectors during the day, were also major culprits in yesterday’s weak market.
The FMCG and finance sectors exerted significant selling pressure on the top NIFTY 50 stocks, causing the index to hit an intraday low of 18311.40. The NIFTY managed to avoid a fall below 18300 on the spot despite the persistent selling pressure, which is good news—at least in the very near term. As the day progresses some sort of rebound in the financials lead to the bounce of NIFTY from the low to the closing price of 18329.15.
NIFTY’s technical setup for this week
However, if we look at the NIFTY spot’s technical levels for this week, the weekly pivot is set at 18227.13. And the upside range is between 18484.86 and 18620.03. Additionally, the range of support is from 18091.96 to 17834.23.
There is a good chance that NIFTY will reach a new high this week if it is able to hold the pivot on a closing basis. However, a close below 18227.13 will cause profit-taking in the direction of the crucial previous psychological breakout barrier of 18000.
Given the current state of the domestic and international markets, we do not immediately foresee any sort of panic situation. Therefore, the 52-week high of the NIFTY at 18399.45 on the upside and 18220-18200 on the downside will now be the focus.
For this week in the NIFTY, a breakout or breakdown on either side will open a door. The NIFTY spot continues to trade well above its 50-day and 200-day simple moving averages, which are set at 17619.36 and 17001.08 respectively.
However, for the time being, if it closes below 18300 today, there will be a slight possibility of profit taking, at least until the levels mentioned above. If not, NIFTY will attempt to set new records again above 18400 at the time.
Now the traders must focus on a plan to purchase on dips up to 18100 or sell near 18400 until it clears the 52-week high on a closing basis again. Not to forget that 18100 is a very strong demand area for the NIFTY.
Sluggishness and pain of volatility in Nifty
The market’s nature is to surprise participants in both directions when it trades at a 52-week high. Therefore, until the indexes and stocks break the high again or experience a significant correction from the current level, traders must be prepared to handle volatility and erratic movement in those instruments.
Indian benchmark stock indices NIFTY 50 and BSE Sensex are currently trading at 18330 and 61618, respectively after initial volatility in Nifty. However, today’s leader is another significant index, Banknifty, which is up approximately 0.5%. Investors and traders should keep a close eye on the US markets, the dollar index, US 10-year bonds, and the USD/INR exchange rate this week.
The street will continue to face sluggish and rangebound sessions, at least until the index set a fresh direction for the buyers and sellers. So for the time being option buyers must avoid any adventure seeing the range bound and undecisive direction of the market.
