By Anand James
After experiencing consistent positive flow for 5 consecutive months, the monthly inflow from FIIs has now become negative. FII net flow has been negative for 11 consecutive days, taking it to the lowest point since the final week of April. The weekly net flow of FIIs, amounting to Rs 3545.6 crore, has dropped by 15% compared to the previous week. FII’s long positions in index futures meanwhile have dipped to 43.9%, when compared to the 30 day average of 63.8%.
After carnage and the subsequent pull back, Nifty 50 is about 3% above the 50 DMA, while the midcap index continues to trade above 8%, suggesting that midcaps continue to fetch higher premiums, and traders have been unwilling to let go of their positions. At least not yet. It is only when the benchmark indices break the key MAs that midcaps start to feel the heat. So, until then expect risk on approach to continue in mid and small caps.
Ever since coming tantalizingly close to the 20k mark, the Nifty has been on a clear down trend for the last 10 days or so. However, even as the trend leaned lower, every third or fourth day during this phase had a positive close, keeping Nifty not far from 19,700, allowing traders to be risk-on. However, last week’s fall broke and held below the 20 day MA for the first time since the recent uptrend began in March 2023. This ushered in panic, exacerbating the fall. Friday’s retracement is on anticipated lines, but is still within the bearish construct, even though we are now back inside a declining trendline channel, which stands a fair chance of evolving into a bullish flag. Such hopes will encourage positive upticks next week as well.
We feel the Nifty is likely to clear the 19,550 barrier and some struggle, but expect bears to regroup once inside the 19,600-670 band. We would hence wait for a break above the 19,800 region to climb back onto the 20,600 trajectory. Alternatively, a slippage back below 19,450 could set our eyes on 19,139-18,900, but the chances of a collapse looks low for next week. Sensex meanwhile, has also formed a reversal candle in short periodicities, which retains optimism for next week. But daily candles show that significant challenges lie ahead, with 66,000 expected to mount serious challenges to upside prospects.
(Anand James,Chief Market Strategist at Geojit Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)