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Trend Reversal Appears To Be Complete As Nifty Breaks Past Key Levels

With inflationary pressures easing off to an extent, it's unlikely that the impact of escalating input costs on corporate profitability will be extended or severe

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The Nifty continued showing strength as expected, breaking out decisively past the 20-week moving average line over the past fortnight. Technical indicators are now signalling a clear trend reversal. The bearish wave that commenced in October ’21 and dragged the index from 18.5K levels to sub 15K levels amidst hectic FII selling seems to have ended.

It’s quite likely now that the bellwether index will head towards the upper Bollinger Band level on the weekly charts, which means that we should be seeing the Nifty at 18K once again sooner than later.

Improving macros and leading indicators such as IT hiring, an uptick in residential sales, promising corporate results and steadily improving GST collections also corroborate the view that a steady economic revival is underway, despite the RBI’s clear “withdrawal of accommodation” stance.

With inflationary pressures easing off to an extent, it's unlikely that the impact of escalating input costs on corporate profitability will be extended or severe. 

We seem to have entered a clear “buy on dips” market right now. Corrections should be viewed as opportunities to increase allocation to equities with a long-term view. Investors with long-term goals should continue accumulating equities in a staggered manner without attempting to time the market, as volatility is likely to persist for the remainder of 2022.

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