Nifty – Sell in May and go away?

Nifty is down for the third week in a row.

Benchmark indices ended the week on a bearish note, witnessing profit booking in all sectors. During the week, Nifty 50 corrected about 71 points or 0.41 percent to close at 17103. The Bank Nifty was also down during the week and corrected by 1.74 percent. On a weekly basis, the Nifty 50 fell for the third week in a row.

April F&O expiry, geopolitical tensions, weak Indian rupee, FII selling, rising US bond yields, rising commodity prices, and inflation concerns have affected the market sentiments during the week.

The Nifty 50 started the week with 218 points down and closed at 16,953.95, down 1.27 percent and on Tuesday, closed at 17200.80, up 246.85 points or 1.46 percent. The Nifty 50 closed at 17,038.40, down 162.40 points or 0.94 percent on Wednesday, and on Thursday, closed at 17,245, up 207 points or 1.21 percent. Likewise, on Friday, the Nifty 50 closed at 17012.55, down 143 points or 0.83 percent. This entire week was up and down moves with both bulls and bears struggling to gain control. 

FIIs and Volatility

The FIIs were net sellers during the week; the market had minimal losses during the week because of support from DIIs buying and the enthusiasm of retail investors. 

The volatility index India Vix closed at 19.42 up by 1.07 points or 5.83 percent week over week, though the volatility index rose to 21.26 on Monday and softened during the week to close at 19.42 on Friday.

The market breadth remained in favor of the decliners for most of the week, except for Tuesday when the market breadth turned positive, with 1281 stocks advancing on the NSE against 865 stocks that declined on Tuesday.

The Nifty index is having key support at 16800 while resistance is at 17400. In the daily chart, the short-term trend is down. The market is in a directionless consolidation phase and oscillating within a range. In the daily chart below, the 50-day moving average and the 200-day moving average lines have converged, showing a critical phase from here the market can move in any direction in the coming week. (Above chart -copyright StockCharts.com)

TOP LOSERS OF THE WEEK

Coal India, ONGC, BPCL, Axis Bank, and IOC were the top Nifty losers for the week. Coal India tops the chart with 9.47 percent down. The other notable losers of the week were Bajaj Finance down 6.17 percent, Hindalco down about 6.06 percent, and Wipro down 5.34 percent.

View the list of all the Nifty 50 contributors.

TOP GAINERS OF THE WEEK

Top gainers for the week were Hero Motors, HUL, HDFC Life, Kotak Bank, and Bajaj Auto. Hero Motors tops the chart with 9.27 percent gains during the week. The other notable gainers of the week were Asian Paints up about 2.29 percent, HDFC Bank up 2.17 percent, and IndusInd Bank up 2 percent.

SECTORS AND BROADER INDICES

All major sectors were down during the week except for Auto. This shows across the board selling and favorites were very few. IT and metal were the biggest losers. IT corrected about 3.53 percent and Metal corrected about 4.84 percent during the week.

The Auto sector is up for two weeks in a row, showing bullishness in the auto sector, especially in the two-wheeler segment. Similarly, the IT sector is down for two weeks in a row, showing weakness because of geopolitical tensions and Fed hawkish comments. 

Similarly, both the Mid-cap 50 and Small-cap 50 followed the benchmark indices and were down 2.20 percent and 2.70 percent respectively during the week.

THE WEEK AHEAD

NIFTY WEEKLY PIVOTS

As per the above weekly pivots data, 16600-17600 is the trading range. The first support is around the 16900 level and if the Nifty breaks this level, then such a break can drag the Nifty down to 16600 or below levels in the short term. View the Pivot Calculator

The Nifty 50 is at a critical support level. The market would remain volatile a little longer till there is more clarity on ongoing geopolitical tensions and the Fed Rate hike. Be ready to embrace high volatility and the gains may not be significant till the dust settles. However, the positive indicator in the current scenario is the large-cap stocks leading the market.

The bias is definitely bearish because of volatility and global uncertainties. Therefore, you need an enormous appetite to hold the positions in May. Breakout of the current consolidation phase can be in any direction. Is Sell in May and go away the right strategy for this month?

This article is only for educational purposes and is not investment advice. Please consult with your investment advisor before investing.