How are the Markets Looking ?
In recent days, the market has witnessed a rapid decline from its peak to 19,200 from 19,850 in just five sessions. This sudden drop is not an indication of market strength, but rather a sign of a distributive phase. Despite the initial breakout above 20,000, it proved to be a false breakout, and the market has now returned to a consolidation phase, with the fate of breaking down from 19,200 hanging in the balance.
Nifty Heatmap
Analysing the Nifty heat map, it is clear that the majority of sectors are facing a downward trend. Banks, Reliance, IT stocks, energy stocks, steel stocks, power stocks, and pharma stocks have all experienced significant declines. FMCG stocks, which seemed least impacted.
Sectoral Overview
Notably, PSU banks have been hit the hardest, losing nearly 4% in just one session, 6.3% over the past week, and a whopping 8.7% over the last month. In fact, this has been the worst month for PSU banks. IT stocks have also experienced a decline, losing 6% this month, with a 2% decrease today alone. Overall, bank Nifty is down 3.3% this month, eroding the gains of the past twelve months, reducing Bank Nifty’s gains to just 2.5%, and even driving private banking down to a mere 5.4%.
Mid & Small Cap Performance
The mid-cap stocks have also suffered a significant blow. They have dropped by approximately 800 points below their support level of 39,600, completely breaking the range formed between 39,600 and 48,000, a 1200 point range. The natural potential support level at 38,400 may be reached in the next trading session. The uncertainty regarding where a base will be established leaves the market in an open book state, where a crashing decline or a period of consolidation are both possibilities.
Examining the small-cap index, it is evident that it has broken down from a flag-like trend and retraced back to the levels of the second week of September. After five weeks of recovery and a retest of the double top, the index failed to break out and is now positioned below the critical level of 11,870. If this support is breached, it could lead to further downside for small-cap stocks. These trends clearly indicate that the rally has been broken. Today, the market broke down below the expected support level of 12,197, falling to 11930.
Bank Nifty Performance
For Nifty Bank, the double top and bottom pivot points have been violated, indicating a potential downward movement towards 40,000-41,000. The charts are painting a bleak picture for the market, further exacerbated by the oversold condition of the US futures market, which has seen a decline of a couple of hundred points.
Global Markets
The possibility of a capitulation event occurring in the US markets in the next week or so has created increased nervousness in the market. It is hoped that once this event occurs, some stability may return. However, the steady upward movement of the broader market has undoubtedly been disrupted, leading to losses for investors.
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