By V K Sharma
The Nifty closed at 22,795.90 on Friday, its lowest closing level since reaching an all-time high of 26,277.35 on September 27. The Nifty has gone below the 22,800 mark four times in intra-day terms but has always managed to bounce back above it on a closing basis.
This puts the Nifty on the edge of a precipice and could tumble on Monday in the opening trade itself.
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The trendline number 52, which was drawn by joining the weekly lows of August 9 and November 22 at 23,893 and 23,263 respectively. The weekly close last Friday was above this trendline, but this is likely to be broken in the opening trade. The next support is at 22,725, the lowest intraday low seen on February 17. This, too, is likely to evaporate in thin air in the open.
The Nifty had risen 4,996 points from the post-election low of 21,281 to 26,277, the highest-ever level on September 27. A 76.4% retracement of this 4,996 swing could act as a support, which comes to 22,460.
Our markets have grossly under-performed the global markets since September end, while Nifty is down 13.25% from its peak, the Hang Seng is up 30.5%, the Shanghai Composite is up 18.9% and the Nasdaq is up 10.2%.
But our gross under-performance could end soon. The ratio of the MSCI Index to Emerging Markets Index, which has been falling sharply from January could likely stabilise in the coming months. The ratio is currently at 2.37, close to the low of 2.27 seen in November 2023.
Currently around 14% of the NSE 500 stocks are above their 200-day moving averages. Historically the markets bottom out when this percentage falls to 11-13%.
In the US, the rally which began with Trump’s inauguration on January 20 has ended. The Dow Jones Industrial Average and the S&P 500 have slumped 1.7% and the Nasdaq Composite tanked 2.9% on Friday on stagflation fears.
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The University of Michigan’s consumer sentiment reading fell to its lowest since November 2023. The purchasing managers’ index fell to 49.7, implying a contraction in the economy. Besides there is growing fear that the administration’s sweeping federal layoffs could push the US economy into recession.
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