The last two weeks have seen the NIFTY capitulating at an alarming pace – the index has fallen close to 800 points in the past 10 trading sessions! Although this correction was on the cards, the momentum of the fall has been far more powerful than expected – this has forebodings of a deeper cut going forward. In effect, the NIFTY has all but wiped out all the gains it had clocked since March this year, in a space of 5 weeks!
The corrections in the small and mid-cap space, invisible to many retail investors, have been even worse. The small cap index dipped bellow 6000 and the NIFTY Mid Cap 50 fell below the 4500-mark last week.
Although the NIFTY has now hit a critical support level from where a technical bounce is likely, an immediate trend reversal appears to be highly unlikely. The stochastic oscillator is still a small distance away from the oversold mark, and so a momentum reversal isn’t to be expected immediately. We’re likely to see March levels of sub-10,000 again in the coming days, albeit post a technical bounce which should not be misread as a resumption of a bullish trend.
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