Nifty reclaims 50-DMA and on its way to record best single-day gains

Update:The Indian benchmark indices added to their initial gains and were trading up by nearly 2.5 per cent on Tuesday with Nifty trading above the 14,850 mark while Sensex inching closer to the 50,200 mark.  

On the way up, Nifty has reclaimed its 50-DMA and is trading near the day’s high. With this, it is on its way to record best gains in percentage terms since March 03, 2021.   

Barring Nifty Realty, all other sectoral indices were trading in green. Nifty IT and Nifty Pharma were up by 3.3 per cent and 2.55 per cent, respectively.   

Update: The Indian benchmark indices have extended their morning gains, aided by indices pivotal like HDFC Bank, Reliance Industries, and Infosys. Nifty index is hovering around the 50-DMA. However, a sudden spike in the US 10-year bond yield has been seen lately. The US 10-year bond yield rises to 1.75, which is the highest since January 2020. It would be interesting to see, how the market would react to this, which is surging higher in today’s session.    

Update: After a long weekend, the Indian markets are back to business, and that too in style as the bulls are up by nearly one and a half per cent with Nifty and Sensex reclaiming their important psychological mark of 14,700 and 49,650, respectively.  

All the sectoral indices are trading in green with Nifty Metal leading from the front as it has gained more than 2.5 per cent, followed by Nifty Pharma, which was up by over 2 per cent. In the pharma sector, Divis Lab and Dr Reddy’s emerged as the top gainers. Dr Reddy’s climbed nearly 2.5 per cent after a report claimed that the company expects the COVID-19 vaccine to get a nod from India in the next few weeks.   

The volatility index i.e., India VIX has further cooled off and is trading close to the 20-mark.   

Interestingly, Nifty April Futures trades with a premium of 82 points as compared to the spot prices while open interest is up by 10 per cent. 

New listing: Nazara Technologies made a bumper market debut, as the stock price opened at Rs 1,990 on NSE, as against the issue price of Rs 1,101.

In the last week, Nifty oscillated in a wide range of 614 points, which was more or less like the previous week and stayed predominately in a corrective mode except for a couple of trading sessions, where it saw some technical pullback.  

On the weekly chart, a bear candle was formed, carrying a lower top and a lower bottom as compared to the previous week, which indicates the corrective intent of the index.   

Meanwhile, on the daily chart, the index had formed a Doji candle as price closed near the open. Further, the index stayed within the high-low range of the prior day. As a result, there was a formation of an inside bar. Additionally, as the range of the day was narrowest in the last four trading sessions, it resulted in the formation of NR4 as well. Overall, we have a formation of Doji+IB+NR4, which indicates contraction of volatility and this has been formed after two days of a massive sell-off.   

The index has retraced 61.8 per cent of its recent upmove and filled the gap, which was created on February 2. Now, this is the point where it gets complicated. Firstly, the 12-day of upmove of 1,850 points have been retraced by 61.8 per cent in 26-27 trading sessions. This slower pace of retracement reflecting high base formation signals a robust price structure. On the other hand, during this retracement, if we check, there are a number of bearish candles while indecisive candles are greater as compared to a bullish candle. Moreover, in the bulk of the candles, we have seen price closing near the lower quartile of the day. Going by this, will definitely not be a healthy sign. In addition to this, the index has closed near about the neckline of the double top pattern.   

So, in the coming week, the range of 14,264-14,575 is crucial to watch out for. A decisive break on either side of the range would trigger a swift move of about 200-300 points. So, a decisive breakout above the 14,575, there is a high probability that Nifty could test the levels of 14,850-14,900 and this would mean that implication of breakdown of the neckline of double top pattern would start to wane. On the other hand, a decisive move below 14,264 could open gates for a further correction towards the levels of 14,000-13,900 in the near term. This zone is a confluence of 100-EMA and 10 per cent correction from the highs. Since the formation of the lows of March 2020, Nifty has not corrected more than 10-11 per cent from its respective highs. Hence, we expect the index to maintain its rhythm of not witnessing a correction in excess of this threshold limit.   

On the indicators’ front, there is nothing much to discuss. The 14-period RSI is at a historical support zone of 40-45 whereas, on the weekly time scale, the RSI (60.39) has closed below the two prior lows and earlier resistance on the same weekly chart. It has actually witnessed a breakdown of the descending triangle. The negative directional indicator (-DI) is dominant and above the +DMI and ADX. Meanwhile, the weekly MACD histogram has entered a bearish zone.