Nifty – Moving Average Convergence!

Nifty is at a very crucial juncture as of now , the short term and slightly long term moving averages have converged with a very high volatility amid lesser participation from large cap Stocks. Barring some sectoral pockets the broader index has been under tremendous pressure inspite of good results by top corporate houses.

There is a lack conviction by FIIs at these levels specially in emerging markets . FII ‘s have been on a selling spree since last 15 days and have hammered extremely strong stocks from their record highs taking money off the table due to uncertainty of the management of inflationary pressures both in US and in emerging markets. The commodity and metals run up against a weakening dollar has shot up the concerns for inflation and a rate hike speculation is spooking the markets.

Right now on daily charts the convergence of 90 and 20 SMA is a crucial point and nifty should sustain this for any further up move , which i expect is difficult until a strong statement comes out from the FED on rate hike and FIIs are comfortable buying at these levels. The Money Flow Index has gone down is large cap stocks which is slightly negative for Indian markets.

To understand this in simple terms , to curb inflation / increased cost of the goods , the government might hike the interest rates so that consumption from borrowing at a cheaper rate is slowed down and liquidity is controlled. With lower rates liquidity increases and the entire ecosystem inflates as the access to money is easier.

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