A Time Correction In The Nifty

The Week Gone By

The week belonged to the bulls after bears ended the party in February. March started with gains for the bulls but historically, March has been a bears' month.

In the last 25 years of March performance, Nifty has ended 14 times in the red and 11 times in the blue with an average return of 0.10%.

Nifty reclaimed 15,000 levels but last week did not belong to the large caps. Midcaps and smallcaps outperformed by huge margins against Nifty and they continued to hit new all-time highs.

I hope you remember our last week's edition of Momentum Moves where we said smallcaps will outperform the Nifty.

On similar lines of analysis, we believe it's time for bears to keep an eye on Bank Nifty.

Why?

In this week edition, we will be sharing views on both the Nifty and the Bank Nifty.

 

The Week Ahead

Nifty hovers in a rising channel

Nifty opened the week with gap-up at 14,638 marking the bulls strong. This move took the index to 15,273.

The bears aren't so weak though. They fought hard to take it below 15,000 with a consecutive Friday signaling profit booking.

We believe the time correction might happen in the Nifty as long as we are hovering in the range of 14,450-15,300. Any meaningful trend would emerge only if either side of this range is broken.

The stock specific action would continue. We hold our view that the smallcap index has potential to outperform the Nifty.

Nifty Daily Chart

 

 

This is the daily chart of the Nifty which is trading in a rising channel (marked in parallel green lines).

The index in the last week of February took support at the lower line of the rising channel and reversed reclaiming 15,000 levels.

Bulls reacted strongly at the key support of 50 EMA (Exponential Moving Average) on the daily chart and ended the bearish momentum in style.

The shakeout at the higher high above 15,176 is a trap for bulls as traders believe the fresh trend has emerged and went long.

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Disclosure: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research ...

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