Perhaps in a pragmatic precursor to tomorrow’s budget, the railway budget contained no populist measures. The intent to consolidate and modernise seemed clear on a cursory reading. May be the devil is in the detail.
Proceedings at the Lok Sabha hit a new low on the ethics and decency scale after the Railway budget was announced. Semi-educated MPs from the ruling party and the opposition exchanged vulgar language and nearly came to blows amid pandemonium in the well of the house.
As if on cue, Nifty sank by more than 150 points after touching a new lifetime high just above the 7800 level. What caused the selling? Who knows? Some times the force of ‘gravity’ becomes strong when an index rises too high without a proper correction.
FIIs have been net buyers on every trading day this month, while DIIs have been net sellers.
Nifty formed a ‘reversal day’ pattern (higher high, lower close) on Tue. Jul 8, supported by strong volumes. That may be the signal for an intermediate down trend. The index is trying to cling on to support from its 20 day EMA, but it appears that the support may not hold for long.
If the index falls further, the 50 day EMA and below it, the 47 points ‘gap’ formed on May 13 ‘14, are the next support levels. A 10% correction from yesterday’s peak of 7808 will drop Nifty to the ‘gap’ area. If that happens, it will be a good buying opportunity.
Can Nifty fall even further? Any thing is possible in the stock market. But remember that the index is in a long-term bull market. A 10% correction will surely attract buyers.
Daily technical indicators are turning bearish. MACD has crossed below its signal line in positive territory. ROC is resting at the ‘0’ line after crossing below its 10 day MA. RSI has dropped to its 50% level. Slow stochastic has dropped sharply from its overbought zone.
The correction is likely to continue a bit longer – unless there are some market-friendly announcements in Thursday’s budget. Use the dip to add.
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