Nifty has come down from almost 18900 (Future 19000) to 17800 within this month and the fall intensified in last week. In response to the question how is market, there is definitely no doubt that the market is bad. On December 1, we posted a caution message at 18800 but there is no doubt that there was zero expectation that market would fall so much, at that point of time. During such a phase, charts bring to us many support levels but index generally breaks supports one after another. And as usual, lots of crazy targets are coming in media, exactly similar like when it was moving up. So, besides identifying the technical supports, let us point out what are the negative factors and what are the possible supporting factors, if any, ahead.
Negatives
1) The most negative part is the chart itself. Nifty has broken all three short term moving averages 5, 20 and 50. Nifty has broken very important support 18200 and psychological support 18000. 2) Nifty has just broken 20WMA in weekly chart and looking dangerous. 3) Nifty has failed a strong bullish HIS pattern in weekly chart. 4) Nifty is forming a strong bearish candle in monthly chart and has broken last month low. 5) USDINR has appreciated a lot in December. 6) Dow jones has not fallen much it is true but Dow has been trading way below its Jan 22 high. 7) FII has shorted Index heavily, their derivatives data is consistently bad, their long short ratio in index future reached 3+ at start of the series. It has come down to 0.78, if it moves towards last time low 0.15 then more pain ahead. 8) India VIX is trading above all short term MA in daily chart. 9) Nifty future premium reached many months high at Nov clearing. Market was overbought. 10) Government has buzzed covid alert across the country, issuing advisory and caution statements. 11) RBI Guv’s statement in MPC minutes more hawkish than expected. 12) Strong GDP estimates and strong job market in US are dashing down the hope for slower rate hike by FED.
Supports
1) Nifty has completed the 50% retracement from last swing low to ATH, which is currently at 17800. And 61.8% level is 17566. 2) Nifty daily RSI at 32, generally it reverses from 30 or just below 30, however in extreme cases 22-25 possible. 3) India VIX 4) Global cues not very weak. 5) Last week in cash segment Net Institutional activities were Positive. In fact, in December also, FII and DII both are net buyer. FII net seller in Index future but index future activities affect only short term trend, if shorting is there short covering will also be there. 6) Dollar index is still weak and there is still no sign of fresh strength. USDINR also not showing signs of fresh high. Oil is rising since 2 weeks but short to med term trend is still weak. 7) Nifty PE was around 22 at 18900, unlike 40+ in first 3 months of 2022. 8) Nifty PCR below 0.60 9) India macro eco data has no sign of weakness. 10) Q3 result in Jan and budget at Jan end – most important and could set the direction. 11) If Covid alert is the reason of fall, although I doubt, then it is surely over reaction and will not sustain. Stocks which were good one month back are not bad now, in fact better now because price is lower now. So, do not hesitate to average or make fresh buy, but in staggered manner. Only thing is, right now do not keep expectation of ultra short term trading profits. It may not be bottom, you cant catch the exact bottom, it may fall few more after you buy. But stocks are still same good as good those were few days back. DO not hesitate for PSU Banks. And many more.
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