V-Shape Recovery Spurts Nifty 50 by 300 Pts After Budget!
The market cheered Budget 2023 which can be seen via a green sea of numbers. The benchmark index staged a stellar rally of over 300 points, bolstering it to a high of 17,966.2, while is going bonkers with its 1,300-point rally to 41,985, by 12:57 PM IST.
A few days back, the entire market was in a deep panic after Hindenburg Research came out with a report on the Adani Group alleging that the group companies had committed the biggest financial scam in corporate history. As many financial institutions have exposure to the group, a selling spree was triggered which took a toll on all frontline indices.
Now, today’s budget seems to have flipped the sentiments of the broader markets. The Adani Group companies are still trading in the red zone, but the broader market is unaffected. Adani Total Gas Limited (NS:) hit the 4th consecutive lower circuit in today’s session, while both Adani Enterprises Limited (NS:) and Adani Transmission Ltd (NS:) are down over 5% each.
Although the Nifty 50 index had already been showing signs of a sharp bottom reversal, today’s move has confirmed a much tricky-to-trade V-shaped bottom formation. After hitting the support zone of 17,400, the index bounced back sharply by 570 points in three sessions, surpassing the immediate resistance of 17,800 (earlier breakdown level).
The options data analyzed in yesterday’s write-up was indicating that the market is expecting a maximum move to 18,000 on the upside by the current weekly expiry which seems to be materializing now. However, the current move should not be deemed to be the resumption of an uptrend, but just a retracement of the prior sharp sell-off on account of the Adani Group fiasco.
This rally seems to be a better opportunity for short sellers as they would now be getting a much better level to initiate short positions. The resistance zone of 18,200 remains ‘the level’ which would be difficult for the index to breach, also making it a very good zone to go short. Looking at , which dropped 11.2% to 14.91, the volatility from here on might diminish as the major budget day is now out of the way.
The next major event is the US Fed’s monetary policy meeting today where the Fed is expected to raise interest rates by 25 basis points.