Muhurat Trading Strategy: Nifty 50 may decline below 24,900, caution warranted, says Kapil Shah of Emkay Global

Diwali 2024: Market experts anticipate that Samvat 2081 will have a major impact on the global economy. Important factors to watch throughout Samvat 2081 will include the Union Elections, the Union Budget, the recovery of China’s economy, activities during the festive season, fluctuations in crude oil prices, and levels of investment inflows.

During the year, Samvat 2080 has been an extraordinary time for the Indian equity market, characterised by the consistent achievement of new records each quarter. Nifty 50, achieved a historic level of 26,216 on September 26, 2024, marking a first in its history. This milestone has led to the Indian market capitalisation exceeding the $5 trillion threshold, establishing it as the fourth largest market in the world, as per various reports.

The market has experienced continuous decline in October, with the Nifty 50 dropping roughly 7%, while the broader market has felt even more pressure, indicating no signs of recovery, according to experts. Kapil Shah, a Technical Analyst at Emkay Global and a Technical Analysis Trainer, guides investors and traders on how to manage this volatility as we enter Samvat 2081.

Muhurat Trading Strategy- Call for Caution in this Diwali 2024, says Kapil Shah, Technical Analyst, Emkay Global, and Technical Analysis Trainer at Finlearn Academy

Kapil Shah offers his insights on the Nifty 50 for the Diwali 2024 season. He recommends caution for traders and investors throughout this Diwali 2024 timeframe. During upward price movements, it might be wise to think about taking profits.

Here's a look at Kapil Shah's in depth analysis:

Nifty 50 Up Trend Time Cycle

Since the inception of NSE, Nifty 50 had a 7 major uptrends ranging from 26 month to 56 months. 6 out of 7 rises were in the range of 40 to 56 months. Recent rally is of 54 months, it indicates time wise maturity of trend.

Red Engulfs the Green (Bearish Engulfing Candle) on Nifty 50 Monthly Chart

Formation of Bearish Engulfing pattern on Nifty 50 Monthly Chart had a bearish implications. In Past major tops coincides with the bearish engulfing pattern. However, there are some observations were made where Index has very brief declining move. Post Bearish engulfing pattern, atleast selling pressure carry forwarded for next month. Looking at Current scenario, Index can witness selling pressure in November month as well.

“Spiky M” Pattern

Since 2008, significant peaks have exhibited a spiky "M" formation. This particular pattern typically requires a minimum of 4 months to fully materialize. While currently considered a premature development, the emergence of this pattern has the potential to incite a substantial market response.

Nifty 50 Short Term Structure

Notably, the correction profile of the past year has exhibited a significant shift. Previously, the market experienced a decline of 5% over a period of 7 to 9 days. However, this time, the index has encountered a decline of approximately 6.5% within 17 trading sessions. Furthermore, it is pertinent to highlight that the index has formed both a Head & Shoulders pattern and an Inverted Flag pattern, both of which signal bearish trends.

Seasonality of Sectors

The table presented above is constructed based on seasonality and elucidates the performance of various sectors in their respective months. A sector is deemed strong if its indices exhibit a positive closing above 65%, and weak if below 40%. The majority of indices have a historical span exceeding 12 years. It is imperative to solicit technical verification. This data can be instrumental in tactically rotating sectors.

In the immediate period, the index is anticipated to demonstrate a negative bias below the threshold of 24,900. There exists a downside potential within the range of 24,000 to 23,800. A breach below 23,800 may precipitate a further descent within the 22,800 to 21,800 range. Consequently, prudence is advised for traders and investors during this Diwali period. During intermediate upward movements, it may be prudent to consider profit booking.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.