Which pockets of market may lead next week and which ones may lag

In a really robust surge, the Indian fairness market scaled higher heights and ended at a brand new lifetime excessive this previous week. In our final weekly word, we had talked about that trying on the week’s choices information and the quantity of Put writing that was being accomplished, there have been increased prospects that the market would present a robust transfer on the upside.

Nifty traded precisely on these strains and managed to type a brand new lifetime excessive. The market had a robust upward directional bias all through the week and ended with a web achieve of 618 factors, or 3.70 per cent, on a weekly foundation. The market is now extremely overbought, and so is Nifty and different key indices, excluding Financial institution Nifty.

Nonetheless, choices information depicts a stronger image regardless of the market being within the overbought territory. The quantum of Put writing being accomplished in every incremental rise exhibits that helps are being dragged increased and that displays the arrogance available in the market’s rise. There are increased probabilities that the present bounce might have some extra room on the upside. Nonetheless, the general construction suggests one must be cautious and preserve strict trailing cease losses to keep away from getting caught within the occasion of any rangebound consolidation at increased ranges.

Volatility has elevated together with the index degree. India VIX edged up 8.49 per cent to 14.5400. Nifty will face stiff resistance at 17,500 adopted by 17,625 degree within the coming week, whereas helps will are available in at 17,200 and 17,050 ranges. Both approach, whatever the pattern, the market’s buying and selling vary is prone to keep wider than normal.

The weekly RSI stood at 77.45. It has marked a brand new 14-period excessive, which is a bullish indication. The RSI is overbought, however stays impartial and doesn’t present any divergence in opposition to the value. The every day MACD stays bullish and stays above the Sign Line.
A big White Physique has emerged on the candles. This exhibits a robust directional consensus on the upside that prevailed in the course of the week. Nifty has ended above the higher Bollinger Band. Some short-term pullbacks inside this band might happen, however broadly, there are increased probabilities that the present pattern will persist for some extra time.

Sample evaluation of the weekly charts confirmed the breakout that occurred when Nifty moved previous the 15,900-15,950 zone remains to be very a lot in drive. After every transfer on the upper aspect, the market has consolidated for a while, solely to renew its uptrend.

All in all, we count on Financial institution Nifty and PSU Financial institution Index to proceed their relative underperformance in opposition to the broader market. Such a behaviour was additionally noticed in a number of the FMCG and consumption shares, regardless of their indices exhibiting a robust efficiency. Within the coming week, it might make sense to stick with the shares which have comparatively underperformed till now and are exhibiting enchancment of their relative power in opposition to the broader market. A selective and stock-specific method is suggested for the week forward.

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

An evaluation of the Relative Rotation Graphs (RRG) exhibits Nifty IT and the Smallcap Indices are contained in the main quadrant. The Realty Index can also be contained in the main quadrant, and it seems to be sustaining its relative momentum in opposition to the broader market. These teams are prone to proceed to comparatively outperform the broader Nifty Index.

Nifty Steel, Midcap and Commodities Indices lay contained in the weakening quadrant. Nifty Pharma, PSE, Auto, Power, Media and the PSU Financial institution Indices proceed to languish contained in the lagging quadrant. Out of those three, the PSU Financial institution Index is exhibiting indicators of delicate enchancment within the relative momentum.

Financial institution Nifty and the Nifty Infrastructure Index additionally keep contained in the lagging quadrant. Nonetheless, they look like enhancing their relative momentum for the higher and should present resilience within the coming days.

FMCG, Companies Sector and Consumption indices are within the enhancing quadrant and should proceed to higher their relative outperformance in opposition to the broader market.

Essential Notice: RRGTM charts present the relative power and momentum for a gaggle of shares. Within the above chart, they present relative efficiency in opposition to Nifty500 Index (broader markets) and shouldn’t be used immediately as purchase or promote indicators.


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