Indian markets faced a challenging extended week, spanning six trading days, grappling with domestic challenges amid a contrasting rise in the US market. Despite a strong start, the momentum shifted when HDFC Bank, the largest private sector bank, reported numbers below market expectations. The stock's decline, given its status as an index heavyweight, exerted downward pressure on the entire market.
The week concluded with Indian markets registering a 1.5 percent decline, in stark contrast to the 0.7 percent gain in the US markets.
While HDFC Bank's performance was a catalyst for the downturn, it is noted that the Indian markets have exhibited structural weakness over the past few weeks, a trend that may persist in the foreseeable future.
#Weakness to Continue 🟥
The Nifty experienced a significant downturn this week, forming a bearish engulfing candlestick pattern on the weekly chart—a clear bearish reversal signal. Additionally, the index broke the higher top higher bottom formation on the daily chart by breaching the low of 21448. While Friday's upward movement may be seen as a bounce or pullback, caution is advised.
On the upward trajectory, a potential rise toward the 21704 – 21850 zone could encounter selling pressure. Ultimately, the Nifty is expected to breach Thursday's low of 21285 in the coming days.
The sharp decline during the week pushed the swing lower to 20 levels, entering oversold territory. Typically, a 2-3 day pullback is observed from oversold conditions. However, considering the Nifty's breach of the support line, a resumption of its downward trend is anticipated once the pullback concludes. The prevailing weakness is likely to persist.
The 40-day advance-decline (A/D) ratio approached the second red line on December 22, 2023, signaling highly overbought conditions. Despite this, the Nifty Index continued to rise until mid-January 2024. However, during this period, the 40-day A/D ratio declined, signaling a narrowing breadth in the market. The ratio, having corrected from its overbought state, may have the potential to decrease further. This is particularly noteworthy as the Nifty index has breached the trendline support, suggesting a potential shift in market dynamics.
In the global market landscape, the US market continued its robust performance, driven by a notable recovery in frontline and banking stocks. Positive data on record online sales in December contributed to an improved market sentiment. However, statements from Fed officials indicating no immediate interest rate cuts led to some corrective movements.
Major European markets ended the week in negative territory, influenced by discussions at the World Economic Forum in Davos, suggesting that interest rates may not see a decline before summer or 2024.
With the exception of Japan, most Asian markets closed the week in the red. Japanese markets reached a new 34-year high, buoyed by easing inflation data. In contrast, despite the People's Bank of China (PBOC) fund infusion, market sentiment in China declined, with a 4.54 percent decrease, and Hong Kong stocks lost 7.74 percent in a week.
Stocks to watch include Tata Motors, TCS, GAIL, REC, Tech Mahindra, Cipla, and Trent, showing strong upside momentum. On the flip side, HDFC Bank, Vinati Organics, Navin Flourine, UPL, and VIP Industries are notable for weakness.
Cheers.
TrendX Institute of Technical Analysis
The week concluded with Indian markets registering a 1.5 percent decline, in stark contrast to the 0.7 percent gain in the US markets.
While HDFC Bank's performance was a catalyst for the downturn, it is noted that the Indian markets have exhibited structural weakness over the past few weeks, a trend that may persist in the foreseeable future.
#Weakness to Continue 🟥
The Nifty experienced a significant downturn this week, forming a bearish engulfing candlestick pattern on the weekly chart—a clear bearish reversal signal. Additionally, the index broke the higher top higher bottom formation on the daily chart by breaching the low of 21448. While Friday's upward movement may be seen as a bounce or pullback, caution is advised.
On the upward trajectory, a potential rise toward the 21704 – 21850 zone could encounter selling pressure. Ultimately, the Nifty is expected to breach Thursday's low of 21285 in the coming days.
The sharp decline during the week pushed the swing lower to 20 levels, entering oversold territory. Typically, a 2-3 day pullback is observed from oversold conditions. However, considering the Nifty's breach of the support line, a resumption of its downward trend is anticipated once the pullback concludes. The prevailing weakness is likely to persist.
The 40-day advance-decline (A/D) ratio approached the second red line on December 22, 2023, signaling highly overbought conditions. Despite this, the Nifty Index continued to rise until mid-January 2024. However, during this period, the 40-day A/D ratio declined, signaling a narrowing breadth in the market. The ratio, having corrected from its overbought state, may have the potential to decrease further. This is particularly noteworthy as the Nifty index has breached the trendline support, suggesting a potential shift in market dynamics.
In the global market landscape, the US market continued its robust performance, driven by a notable recovery in frontline and banking stocks. Positive data on record online sales in December contributed to an improved market sentiment. However, statements from Fed officials indicating no immediate interest rate cuts led to some corrective movements.
Major European markets ended the week in negative territory, influenced by discussions at the World Economic Forum in Davos, suggesting that interest rates may not see a decline before summer or 2024.
With the exception of Japan, most Asian markets closed the week in the red. Japanese markets reached a new 34-year high, buoyed by easing inflation data. In contrast, despite the People's Bank of China (PBOC) fund infusion, market sentiment in China declined, with a 4.54 percent decrease, and Hong Kong stocks lost 7.74 percent in a week.
Stocks to watch include Tata Motors, TCS, GAIL, REC, Tech Mahindra, Cipla, and Trent, showing strong upside momentum. On the flip side, HDFC Bank, Vinati Organics, Navin Flourine, UPL, and VIP Industries are notable for weakness.
Cheers.
TrendX Institute of Technical Analysis