Technical Charts And More – Notice What The Market Didn’t Do

It was not just the Nifty 50. The Bank Nifty too rallied almost till the 62% level. Even though a very large bulk deal occurred in Kotak Mahindra Bank Ltd. while HDFC Bank Ltd. keeps seeing multiple big blocks being transacted frequently—the bank index still managed to sustain itself some. There was also news flow stating that banks and financials have been the main selling items by foreign institutional investors and even that didn’t dent sentiment much.

Lending helping hands were Reliance Industries Ltd. and ITC Ltd., both with good weight on the Nifty. The energy index was shored up nicely by some improvements in RIL. Sentiment always improves when metals are on the move and that happened in a chunk last week as metal stocks were in good form and gave plenty of opportunities for traders to be active in the market.

Had we seen some more robust action in the midcap and small-cap indices, one could have been a little more sanguine about the trends but they were a bit mixed. There is nothing like rising values in one’s portfolio to perk up the adventure spirit among traders and active investors. ITC ran a solo race in the FMCG space though and could not salvage the trends for that sector because several others from there caved in, kind of nullifying the contributions by this hitherto somnolent stock.

While on ITC, the near-vertical move cannot go unremarked. See the next chart. It is one of the largest bullish candles on the monthly chart (with another week to go for the month) accompanied by large volumes. That certainly is a departure from the normal and presages more gains into the future. Perhaps the up move that so many in the market are waiting for in ITC is finally about to manifest?

Interestingly, there was also a sharp decline in the open interest in the futures for the stock. When you place that in the context of the price action, it seems evident that long-term shorts or even arbitrage shorts have been wound up in the counter. The fourth chart shows this setup. Note how the delivery volumes in the stock have been going up too.