Nifty Reaches Critical Short-term Inflection Point

The bellwether index fell for the third consecutive time last week, even as the Dow hit a new all time high, the USD slipped back, and oil prices gave us a breather, following Trump’s production appeal to the OPEC.

Friday’s panicky selloff saw the NIFTY oscillating nearly 500 points intraday, before settling at 91 points below its previous close.

The fact that the selloff was triggered by a relatively small bond sale of DHFL by an asset management company, signals the overall sentiment of the market, which appears to be wary and cautious now. Incredibly, markets have fallen from the top of the Bollinger band to the middle band (20 week moving average) in a space of just 3 weeks. Although the Index did take intraday support below the 20-week moving average and register a powerful bounce, the sheer speed of the 600 odd point correction in the space of the past three weeks indicates that a deeper correction may be on the cards here.

The NIFTY stands at a critical inflection point right now – albeit sooner than expected. If the bulls fail to take charge here, we’re probably going to see it slipping back a further 500 points or so, down to the 10,500 mark over the next few weeks. This week, the index is more likely to consolidate and meander about before starting its next wave of correction.

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