Indian markets trim early gains; RBI to continue monitoring emerging situation & deploy resources in command as necessary

Update:Indian markets have trimmed their early gains and were seen trading with gains of nearly half a per cent. The advance-decline ratio is strongly in favour of the advancers. 

Meanwhile, all the sectoral indices were trading in green with Nifty PSU Bank leading from the front, followed by Nifty Metal.   

Bank Nifty was quite volatile just before RBI Governor began his speech. During his speech, RBI Governor mentioned that the economic situation has altered drastically with a rise in infections. Further, he mentioned that the small businesses are bearing the biggest burnt of the second wave of infections. He also added that the inflation trajectory over the rest of the year will be shaped by COVID-19 infections along with the impact of localised measures. However, a normal monsoon forecast may have a soothing impact on inflation pressure. In addition, he also mentioned that RBI may announce a fresh set of measures to respond to the pandemic. 

It was yet another day of roller coaster ride for Nifty as a movement of 262 points was witnessed, which was above the 10-day average.  

Nifty opened the session on a positive note and extended its gains to scale above the 14,700 mark. However, sharp profit booking emerged from these levels and within no time, the index was back below the 14,600 mark. Thereafter, the index traded in a stipulated range but in the last leg of the trade, a sharp sell-off emerged and the index ended down by nearly 1 per cent.   

The price action of the day formed a bearish candle as the closing was lower than the opening level and wiped out the recovery of the prior session.   

The positive momentum was limited to one day and Nifty resumed the downward move again. Monday’s recovery of over 200 points from the day's low was short-lived and Nifty once again tested the 14,461 support level. Since February 26, Nifty had tested the support zone, which is placed in the region of 14,420-14,480 several times. In fact, it tested this zone multiple times in the last seven trading sessions.  

Nifty is moving in a downward channel and the leading indicator, RSI is in an upward channel. This negative divergence of price making a lower high and the RSI making a higher high is giving clear signs of suspicions. We have not seen this kind of negative divergence after March 2020.   

Going ahead, the 100-DMA, which is placed at 14,486, is a key support level. A decisive close below this would open gates for a further down move towards the level of 14,240-14,150.   

On the upside, the level of 14,660-14,740 is a big hurdle for the bulls and once the bulls manage to cross this hurdle, the next hurdle will be placed at 14,880 levels.