India’s benchmark Nifty Future plunged 190 points intraday and successfully pushed the bulls out of the market. Today’s sharp fall is a classic example of why it is extremely dangerous to hold long positions in a buy trend where institutional buyers are not present. Although today’s fall was laced with volatility, it failed to push India Vix above 15. Going forward, Nifty is likely to face stiff resistance around Monday’s range high. The two most important questions are, why did Nifty fall today despite a buy trend and will the selling continue?
Why Did Nifty Fall Despite A Buy Trend? Today’s fall can be linked directly to the budget and the absence of the institutional buyers in a buy trend. Although the budget presented a promising blueprint to drive India into a $5 trillion economy by 2024, the market was not convinced with the Finance minister’s proposal of a Rs 70,000 crore package to recapitalize the PSU Banks. Secondly, the government rolled out a divestment target of Rs 1.05 lakh crore for FY 20 but did not highlight how it planned to fund such a reform measure.
Will Selling Continue?
The 3D Delta system is indicating that today’s fall has pushed Nifty into the negative territory and the index is likely to face stiff resistance around Monday’s range high. The best idea is to short Nifty at rise. There are three important factors that traders must keep in mind at this point; first Nifty should be sold only if it fails to trade above Monday’s range high. Second, the index might witness a big fall if institutional sellers enter the market on Monday. The third and the most important factor is since the budget is over and India Vix has closed at 13 despite a 190 points plunge, there is a possibility of institutional buyers entering the market if Nifty crosses Monday’s range is high. Therefore, traders must keep all options open and stay away from all pre-defined strategies when the market opens next week.