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In the week ended August 21, benchmarks Sensex and Nifty advanced around 1.5%, supported by higher global markets. Nifty is in a triangular wedge, which is making higher heights. The index forming a rising wedge pattern where the upper trend will act as immediate resistance. There are certain possibilities that Nifty can be reversed in the downward direction or can be directed towards the upward direction, which can happen in the coming days. The PE value has increased tremendously since the pandemic has occurred which is alarming in a few manners. The channel has also become narrow as Nifty has grounded in a narrow trading band as indices struggled for direction. Although the RSI looks positive, the MACD is marching towards the exhausting vicinity.
On August 22, 2020, RBI Governor, Mr Shaktikanta Das regurgitated the growing disconnect between financial markets and the real sector. He indicated at a looming correction in the buoyant stock markets. He said that there is so much liquidity in the system, in the movement, that’s why the stock the market is very buoyant and it is definitely disconnected with the real economy. These points mentioned by the governor is extremely crucial because he’s hinting that the movement in the stock market is not aligned with the economy. The stock market is buoyant because of the extensive liquidity in the global economy.
Back in 2007-2008, when the market was at the peak there were 14 securities that were banned under F&O Comparing it with the current scenario, rigorously 14 securities are banned which is an indication that the stock market is elevating in the right direction. These are the few elements that indicate that aspect of correction lies ahead in the coming times.