The market after a good opening turned around by midday and closed in the red. Such type of sessions are generally not a very good sign for the coming few days and we could be looking at what looks a lot like a top formation on the daily chart and it has been in the works now for a while.
As we can see we do not have much of a reversal pattern to really speak of and this one is taking its own sweet time to form.
The index which stands out in all this is banknifty actually as it is the index which has failed to make new all time highs and sustain. There are several stocks which are still to make fresh all time highs and only time will tell if they actually make one.
Banknifty having failed to make a new all-time high is right now heading to the support of 30,900, though the pattern the index has been making looks like it could take it a lot lower than that, the support to watch out for the index is actually at the level of 28,400 odd. It is highly unlikely for that level to be broken and we can actually look at making fresh commitments once the index were to reach that level. That was the level that has been tested several times before and in this rally it was breached with relative ease.
The fall though is the sharpest in the IT sector and one cannot rule out that we could see this sector correct further for some time more. The sector has been one of the leaders of the rally and once it starts correcting Nifty will find it more and more difficult to rally. Right now the sector is actually the largest drag for the index and till the time we do not have the sector stabilize we will notice that the headline index finds it difficult to rally.
The out-performance of the pharma sector though has continued even in the current correction as we saw the pharma index was the largest gainer today and actually closed in the green.
The stock that stood out in the pharma sector was Auropharma.
As can be seen in the image above we have the auropharma making a new all time high today. Notice the volumes as well and we can see that the stock is actually looking to break out from a consolidation and all this when the index has been falling !
The midcap index also is looking like it will correct further and is moving in sync with the headline index.
While the index look like it is slightly reluctant to correct we notice that the index is at all time high resistance and is also far away from any meaningful support. Both combined mean that any correction in the index has the potential to take it down considerably to the nearest support zones which are more than 10% away from the current levels.
The budget is around and while the pre-budget rally has materialized we have the issue of the Europe which is suffering from the pandemic and could head into another technical recession. That is probably what is causing a lot of market participants to temper their expectations of a rapid economic turnaround.
In the meantime wish everyone a very Happy Republic Day !