After a decent rally in November and December, the market has started to show some curious data points. Let’s look at some internals of this month:

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The Nifty is up 0.9 percent and knocking on the doors of 11,000 repeatedly. However, only two stock — Reliance and Infosys — have contributed 1.8 percent of the Nifty move. The balance 48 stocks are actually leading the index down 0.9 percent.

The Midcap Index is down 2.8 percent and Nifty Junior is down 3 percent. The Nifty Junior broadly represents the non-index largecap market.

The advance/decline ratio which basically measures how many stocks are up vs down on a given day on an average has been 1:2 in favour of declines. There has been only one day in January where the advance/decline has been decently in favour of advances.

What does this mean?

Well for someone who is a believer in classical patterns, this is as good an indicator of distribution as any.

What is distribution?

Where the benchmark index looks quite good (Even if helped by just 2-3 stocks) but beneath the surface, the smart money is busy distributing midcap holdings at a good price while they still can.

Normally, these phases, if not broken soon, lead to a significant market correction. All you need is a trigger. And what could that trigger be? We don’t know that yet but it would pay to be a bit cautious on the market once again and not get too adventurous.

The risk of this thesis being wrong is always there. In case the Nifty breaks 11,000 convincingly and more stocks start to participate in the rally with volumes, I will reverse my call but till then, this remains my base case.

Anuj Singhal is the stocks market editor at CNBC-TV18.

First Published:Jan 22, 2019 9:53 AM IST