The Nifty’s 17% rally from mid-June lows may have surprised most bullies on D Street, but it has come at significantly lower cash market volume, raising doubts over its stability. In the past, whenever Nifty tested 18,000 on low cash market trading, the index has corrected. This has created a similar fear this time as well.
The benchmark corrected from a record high of 18,604.45 on October 19 last year to 15,183.4 on June 17, 2022. In the midst of this period, it tested the 18,000 level twice, reaching a high of 18,350.95 on January 18, falling to a high of 15,711.45 on March 7. In the wake of the Ukraine conflict. It rose again to 18,114.65 on April 4, followed by plumbing through 15,183 on June 17.
On both occasions, cash market volumes were significantly lower than in October. Average daily turnover (ADT) was 81,361 crore in October last year, NSE data showed. When Nifty again tested the 18,000 mark in January this year, the ADT for the month was low 64,178 crores. it was 68,013 crore in June.
Nifty then corrected after testing 18,000 on lower volumes. Most recently, it rose to an astonishing 17,992 intraday on August 19 from 15,183 on June 17, just eight points lower than the 18,000 mark and closed at 17,758. So far this month, ADT has been 58,896 crores, lower than the previous occasions when the index retested the 18,000 level.
This has raised concerns among broking executives like Pritesh Mehta, senior vice president (research) at Yes Securities, whether the market has peaked or is likely to reach one soon before correcting as it did on the previous two occasions.
Dharmesh Vala of Nayan M Wala Securities believes that Nifty is still at peak and may decline by 800-1,000 points.
“The latest phase of the rally has come amid a very light market and I think the correction has started,” Vala said.
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