D-Street outlook: Dalal Street Week Ahead: Which sectors may lead market action and which ones may lag

In out final weekly notice, we had talked about that the one hassle for an in any other case buoyant Nifty might be that it’s now overextended on the each day chart. The week that glided by noticed the market consolidate at larger ranges. Within the world panorama, alerts of taper tantrums from the US Fed prompted some risky reactions within the world markets, however the Indian market remained very a lot resilient and Nifty protected the important thing ranges because it consolidated in an outlined vary.

Within the two-day correction, Nifty has ended with a web lack of 78.60 factors (-0.48%) on a weekly foundation. At the start of the week, the 50-pack had turned overbought on the each day charts; and the PCR throughout all expiries had reached near 1.80 stage. The over-extended nature of an in any other case buoyant market wanted one wholesome correction, and we noticed that occur within the second half of the earlier week.

Given the energy of the US

Index, steel shares took a success. Nonetheless, the important thing sectors and shares that had been anticipated to play a catchup continued to stay laggards. The volatility elevated; INDIA VIX, rose 7.89% to 14.02 on a weekly notice. Within the coming days, it might be essential for Nifty to defend the 16,300-16,450 zone to keep away from any main corrective transfer.

Nifty will see the 16,600 and 16,730 ranges play out as probably resistance within the coming week whereas helps will are available in at 16,350 and 16,220 ranges. The weekly RSI stood at 70.29 stage. It stays within the mildly overbought zone. The RSI, nevertheless, stays impartial and doesn’t present any divergence towards the worth. The weekly MACD is bullish and stays above the Sign Line.

The weekly RSI stood at 72.11; it has marked a brand new 14-period excessive, which is a bullish signal. The RSI is mildly overbought. Nonetheless, it stays impartial and doesn’t present any divergence towards the worth. The weekly MACD is bullish and stays above the Sign Line. A powerful White Physique emerged on the candles. It reveals directional consensus among the many market individuals. A Spinning High occurred on the candles.
Sample evaluation confirmed the breakout that occurred on the each day charts above the 15,900-15,950 ranges stays legitimate and really a lot in motion. Weekly charts present the index has continued with its bounce following eight weeks of sideways consolidation. They continue to be above the sample help pattern line drawn from the lows shaped in March 2020.

The US Greenback Index has resumed its upward transfer after some ranged consolidation. The strengthening of the US Greenback Index is a unfavourable for commodity costs. We might advocate utilizing any bounce within the steel shares within the coming week to guide revenue and take the cash off the desk. The defensive sectors like FMCG, Consumption and IT are prone to present resilience. It is usually anticipated that Financial institution Nifty, which has been a laggard, might try to right its relative underperformance. In any case, it’s urged to keep away from shorts, make purchases selectively and defend income vigilantly at larger ranges.

In our take a look at Relative Rotation Graphs®, we in contrast varied sectoral indices towards CNX500 (Nifty500 Index), which represents over 95% of the free float market cap of all of the listed shares.

The evaluation of Relative Rotation Graphs (RRG) confirmed regardless of lackluster efficiency, the Realty Index stays contained in the main quadrant, although it seems to be barely paring its relative momentum and consolidating just like the small cap index. The Nifty IT Index stays within the main quadrant; it seems to be firmly sustaining is relative momentum towards the broader Nifty500 index. This group is about to comparatively outperform the benchmark. Nifty Metals, Pharma, and PSE Indices are contained in the weakening quadrant together with Commodities and the Midcaps.

The PSU Financial institution Index has rolled contained in the lagging quadrant and so has the Media Index. Nifty Financial institution, Auto, and the Power Indices additionally stay contained in the lagging quadrant. Nifty Providers Sector index is contained in the enhancing quadrant together with the Nifty FMCG and the Consumption Indices. These teams are prone to put up a resilient efficiency towards the broader market.

Vital Notice: RRGTM charts present the relative energy and momentum for a gaggle of shares. Within the above chart, they present relative efficiency towards Nifty500 Index (broader markets) and shouldn’t be used straight as purchase or promote alerts.


(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founding father of EquityResearch.asia and ChartWizard.ae and relies at Vadodara. He may be reached at milan.vaishnav@equityresearch.asia)