Nifty 50 Ideas - It's a Draw - 16-Jul-24

The Indian benchmark equity index, Nifty50 has only one direction, up. Despite widespread warnings from the so-called market experts about over-valuation in stocks and a likely correction, Nifty has only surged higher and higher. Sound bytes about the likely correction first started in Jan/Feb this year. Since then, the index is higher by 10%. So, even if a correction actually happens, we would probably reach near the levels of Jan/Feb.  

Let’s evaluate the daily candlestick chart of Nifty to catch a glimpse of probable future indications. Since early June, prices have moved up but volumes have declined, suggesting a weak uptrend. The Average Directional Index (ADX) has been consistently below the 20 mark - another indication that prices are actually not trending. Momentum indicators have been overbought for more than 2 weeks. Technically, Nifty looks to be in a weak uptrend/non-trending. Such trends are always questionable. 

If one looks at the SIP inflows into Indian equities, ‘correction' could be debatable. As per AMFI data, SIP inflows touched an all-time high in Jun’24 to Rs. 21,262 crores. It is the 12th consecutive month of a new all time high in SIP inflows. Finally, Indians are waking up - a great sign for the evolution and development of equity markets.

Technically, am biased towards a decline while some fundamentals paint a rosy picture. So, it’s a kind of a draw. Investors should continue with their long term investment goals while short term traders should be watchful.