As equities continued to tread downwards, benchmark Nifty 50, along with more than half its constituents, closed below their respective 200-day moving averages (DMA) – a key technical parameter which indicates a potential warning sign for investors that more pain could be on the horizon.
The 50-stock index fell for the seventh consecutive session on Monday, marking its longest losing streak in more than 20 months. The Nifty and Sensex closed 0.3% lower each at 23,453.80 points and 77,339.01 points, respectively.
This is the first time in more than 19 months that the indices have closed below 200 DMAs. Along with this, 30 Nifty constituents, including Reliance Industries, TCS, Tata Motors, Axis Bank and IndusInd Bank, also closed below their 200 DMAs.
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The market has been on a downward trajectory since late September due to persistent selling by foreign portfolio investors (FPIs) amid various concerns, including valuations, slow earnings growth and geopolitical tensions. The selloff has also coincided with China announcing stimulus measures to revive its economy.
“The Nifty’s trajectory has turned bearish-to-sideways, with every attempt at recovery encountering firm resistance. The close below the 200 DMAs and the previous week’s low of 23,800 suggest a cautious stance,” said Dhupesh Dhameja, derivatives analyst at SAMCO Securities.
FPIs remained sellers on Monday as they offloaded shares worth Rs 1,403 crore. On the other hand, domestic institutional investors bought Rs 2,331 crore worth of shares.
Raj Deepak Singh, derivatives research analyst at ICICI Securities, said the primary trend in the market remains negative. “It is a sell on rise market with data suggesting limited upside… Even if there is some short covering in the (monthly options) settlement week, it is unlikely to serve as an indicator that correction is over.”
The overall market breadth was in the favour of decline on Monday as 2,486 stocks fell compared with 1,611 gainers. The BSE smallcap index underperformed benchmarks, closing 0.7% lower, while the BSE midcap index ended with 0.2% losses.
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