Today was a make or break day, at least for the short term, for investors in the Indian capital markets – National Stock Exchange (NSE) and BSE (formerly Bombay Stock Exchange).
The benchmark indices of the stock markets – Nifty and Sensex – closed on Friday (on a daily basis) at their resistance forming a doji candle on the price chart.
In technical analysis a tiny doji candle indicates a tiring out of both buyers and sellers. Also, a candle is to be evaluated in the context of the location where it occurs.
This doji candle formed at a resistance a little below 15,500 for Nifty. The index was turned downwards from this price zone earlier on February 16, 2021 also.
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Though the day opened with the indices falling but they gathered support and began moving upwards around 9:30 am.
The current relatively large-bodied day candle of Nifty indicates conviction of buyers and thus following technical analysis rule of resistance and support interchanging roles once broken, 15,500 can be considered to have been achieved.
However, resistance or support, both are tested at least once when they are broken. In other words, after a small rise, the index is expected to come back to price zone of 15,500 and then if it shows upmove, that would be powerful to the upside.
Talking about the sectoral performance around 1:35 pm, realty stocks are leading the upmove with the index being up by 1.33%, followed by private banks whose index is up by 0.7%.
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The sectors pulling the markets down today are public banks and media with the indices change by -0.8% and -0.77% respectively.
In other news, PNB Housing Finance is one of the darling of the day with the stock rising more than 20% intraday. This is believed to have happened as the company’s board has agreed to raise Rs 4,000 crore via preferential issue of equity and warrants.
The key participants are Aditya Puri, former CEO of HDFC Bank and Carlyle Group.
Even though, the investors are cheering the development as clearly demonstrated by aggressive buying that has exhausted all the willing supply in the market, still, technically, preferential allotment reduces the ownership per share and thus there is no point in rewarding this decision of the company with buying.
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In simpler terms, preferential allotment is like cutting a pizza into more slices and everyone’s slice will be cut into smaller parts for no fault of theirs.
In other words, on existing shareholders there is a negative impact of preferential allotment as is the case with PNB Housing Finance. The development and the investors’ reaction may be fine for trading, but for investing and ownership purposes, the stock deserves a sell at the moment since, as explained above, the ownership percentage per share will reduce.
Another superstar performer is REDINGTON, which too is up by 20%. Though no readily available fundamental analysis reason is available to assuage a retail investor or trader’s foolish need for a story, but the price action indicates something big is happening in this stock too.
The largest losers include DISHTV which changed by -6.79%, ADVENZYMES which changed by -5.36%.
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