Momentum may continue in broader markets with Nifty support at 14,977

Nifty logged a hat-trick of losses on Thursday as it extended its southward journey for the third successive day. The index went down by nearly 2.29 per cent from its all-time high, registered on Tuesday.    

The index opened in green on Thursday, and it even attempted to move higher during the morning trading session but failed near about the opening level of the prior bar. Thereafter, the index went onto breach the level of 15,100, and in the end, it settled at 15,119 levels with a loss of 0.59 per cent.     

Bucking the trend, the broader indices outperformed with Nifty Mid-cap and Small-cap adding 0.47 per cent and 0.96 per cent, respectively. Nifty Mid-cap and Small-cap indices have relatively outperformed the frontline indices in the last week. On the other hand, defensive sectors like Nifty IT, Nifty FMCG, and Nifty Pharma underperformed the frontline indices.      

The price action formed a bearish candle for the third day, carrying lower high and lower low. Nifty index registered a fresh 5-day low on Thursday. It has also closed below the 5-EMA and 8-EMA. At the same time, the 8-EMA has begun to trend down. On the lower timeframe i.e. 60-minutes, the index has breached its 20-hourly moving average and at the same time, the moving average is trending down, which are some of the alarming signs for the short-term trend.     

At present, the index is trading up by 1.90 per cent from its 21-EMA. We believe an extended breather from here on would get anchored around 14,950-14,977. The buying demand is expected to emerge around this support area as it is a confluence of 50 per cent retracement of the post Union Budget rally (14,469-15,431.75) at 14,950 while the last week’s low is placed at the 14,977 level.   

However, the stock-specific action would continue as we are seeing the broader markets outperforming the index. Interestingly, Nifty Small-cap index has a lot to catch-up on as it is still trading nearly 19 per cent away from its all-time high level as against most of the key indices, which have logged fresh all-time highs. Hence, stock-selection would be crucial in the coming week and along with this, the primary focus should be on position management.