The broader market Nifty 50 index has seen a sharp decline on the last day of the week, falling 1.03% to 22519.4. This is the sharpest fall (in terms of %) since 19 March 2024 when the index took a hit of 1.08%.
The fall has primarily been triggered after hotter-than-expected US CPI data which came in at 3.5%, against the forecast of 3.4%. This data has further delayed the possibility of rate cuts this year which is what the markets didn’t like and as a result, a broader-market selling took place on Friday.
The selling from FIIs is also concerning as they remained net sellers for four out of five sessions in the week with a net outflow of INR 6,526.71 crore. A total of INR 8,027 crore was seen in selling figures on Friday on fears of changes in the India-Mauritius tax treaty. The relentless rise in gold is also a sign that a large chunk of money is finding its way to this safe haven.
However, when looking solely at the price charts, the broader trend is still positive. The index is at an all-time high and only one day of selling cannot negate the ongoing uptrend. Nifty 50 is moving fast to its support zone of 22,300. This zone can become a good area to think of initiating long opportunities.
The very short-term trend can be deemed to have become negative only if this support is breached from the upside. But even then the trend might turn to more rangebound instead of a strong downtrend, due to the underlying bullishness in the markets and some uncertainty till elections.
India VIX had also risen 3.78% to 11.53 on Friday, which is a sign of increasing premiums on Nifty options which generally happens due to a fear of a large movement. Therefore, hedged positions might be more favorable in this rising VIX environment than the naked ones.
Traders should also keep in mind that the Nifty 50 lot size is becoming half - at 25 from 26 April 2024 and take their positions accordingly.
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