Axis Bank, Bajaj Auto: Nearly 45% of Nifty500 stocks trading below 200-DMA

Stocks breaching 200-DMA may see aggravated selling pressure in coming sessions.

The broader indices, the BSE Sensex and the NSE Nifty, lost considerable ground in the last week and slipped nearly 4 per cent each. This sharp fall has pushed several stocks, especially from the broader markets, below the 200-day moving average (200-DMA). 

Technically, traders and investors view 200-day moving average (DMA) as an indicator to decide on the investment strategy. Although this is a simple mean of 200-sessions, the existence of any stock above and below it exhibits the underneath strength and momentum. Any stock trading above 200-DMA is seen positively by traders and investors as it is likely to move up in the sessions ahead and vice-versa.

At the current levels, 221 stocks in Nifty 500 – nearly 44 per cent – are trading below their respective 200-DMA with Apollo Tyres, Finolex Cables, Jindal Steel & Power, Wipro, Godrej Properties, Adani Ports and Special Economic Zone witnessing intense selling pressure.

“Broader volatility will continue at elevated levels through the next couple of weeks. Prices reflect heightened anticipation of a tighter policy stance by the US Fed post the meeting this week. Uncertainty around the quantum of tightness in the policy along with upcoming expiry and the Union Budget have many investors on the edge. The series of events are culminating into a global risk-off environment, only more amplified within domestic context. Expect high volatility in broader indices as foreign investors trim exposure to risky growth assets, while domestic institutions await policy clarity,” said Rakesh Singh, CEO-Broking, Fisdom.

Spandana Sphoorty, Vodafone Idea, Max Healthcare, PI Industries, Info Edge (India), Mindtree, PTC India, Havells India, Tech Mahindra, Mphasis, and Aurobindo Pharma from the mid-and small-cap segments on the BSE have lost between 10 per cent and 28 per cent this far in 2022. 

“The way mid-and small-caps have tanked over the past few days is a cause for concern. The Nifty500 index slipped around 5 per cent in intra-day trade on Monday alone. There is nervousness ahead of the F&O expiry and weak global sentiment. While the budget may not spring a negative surprise, it may lack triggers for the markets to move up. Investors should stay away from the mid-and small-caps for now and use the market fall to buy large-caps,” said Nandish Shah, technical and derivative analyst at HDFC Securities.

“Technically, 17,150 will be a critical support level for the Nifty, which is a 61.8 per cent retracement of the previous rally from 17,410 to 18,350. Below this, we can expect the Nifty to move towards its 200-DMA that may coincide with 16,800 level. If it manages to recover from 16150 levels, we can then expect a pullback towards 17,600-17,800, which will be immediate resistance area for the index," said Parth Nyati, Founder, Tradingo.

Despite the near-term headwinds, analysts still see equities as the preferred asset class. Though they are a bit concerned about the inflation rate that is running very high in the US which could prompt the US Fed to increase interest rates much faster in the future, the market, they believe, has already priced in faster tapering and at least one rate hike by March 2022.

“Given the faster-than-expected tightening by the Fed, overall de-rating for global equities including India cannot be ruled out. However, we do not anticipate India’s valuation premium to materially de-rate in the near-term given marked improvement in India’s macro fundamentals and strength in corporate balance sheet. Currently, we continue to maintain a moderate overweight position in midcaps,” wrote Jitendra Gohil, head of India equity research at Credit Suisse Wealth Management, in a recent note co-authored with Premal Kamdar.

The list of Nifty 500 stocks trading below 200-DMA: -

spidersoftwareindia

spidersoftwareindia

spidersoftwareindia

spidersoftwareindia