Mumbai : The Nifty index of the National Stock Exchange continues its climb despite a sell signal from a key momentum indicator.
The relative strength index (RSI), which is tracked by many investors to identify whether a security is overbought or oversold, has hit an 11-month high of 83.69 on the Nifty. Many investors believe that the market is heavily buying when the RSI reaches above 80.
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If foreign portfolio investors (FPIs) continue to buy, the RSI could remain higher for a longer period, as seen since early August, which means the market could move above current levels or consolidate. Is.
On August 17, Nifty RSI reached a high of 83.69. Levels above 70 indicate an overbought market and below 30 an oversold.
The last time the RSI rose so much was on 16 September 2021, when it touched 85.6. At that time Nifty was trading at 17,519. From there the index reached a record high of 18,604 on 19 October. After that the index fell to 15,183 on June 17. The RSI on that date was 28.36, which means that the market is highly oversold.
Nifty is up 18% from June’s low of 17,944 on August 17. The RSI rose to 83.69 by FIIs who bought $4.6 billion worth of Indian shares in August, the highest in any month since December 2020, when they bought $8.4 billion worth of shares. FPIs bought shares worth $600 million in July, becoming net buyers for the first time in nine months. The RSI at the beginning of July was at 44.72.
Nitin Kamath, Head of Zerodha, said, “My view is that the US markets are in a brutal bear market rally and could peak anytime. If the US goes down, we go along. However, with no leverage, We will continue to outperform due to factors like high growth rate and stable government.”
India Charts founder Rohit Srivastava expects Nifty to reach another peak before turning sideways.
Pritesh Mehta, Senior Vice President, Yes Securities said, “RSI is at higher levels, indicating that the market may take a break at these levels. However, strong FPI inflows could provide a floor to the market. This would mean longer RSI. May remain at higher levels for higher levels in which Nifty trades at higher levels.”
Domestic institutional investors absorbed around $34 billion in FPI sales from October to June this year, allowing the market to outperform global peers and other emerging markets. With the return of FPIs, analysts expect Nifty to outperform.
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