Nifty: Dalal Street Week Ahead: Which sectors may lead and which ones may lag now

The week passed by remained uneven. In our earlier weekly be aware, we had talked about that Nifty is unlikely to see a runaway rise from right here on, because the technical setup in addition to choices knowledge have been pointing to consolidation forward. Nifty traded in a 490-point vary over the previous 5 periods and stayed largely within the corrective mode. The index consolidated in a broad however outlined vary, because it dragged the resistance factors decrease. Following a secure however corrective week, the headline index closed with a web lack of 321 factors (-1.80 per cent).

From a technical perspective, Nifty has marked the 17,900-17,950 zone as an intermediate prime. This additionally will get mirrored within the Choices knowledge, which reveals highest Name Open Curiosity at strike value 18,000 after heavy Name writing actions. The earlier 5 days noticed the formation of a broad buying and selling vary within the 17,400-17,950 space. Until the market violates both of those two factors, the index ought to proceed to oscillate on this broad vary. Any main slippage under the 17,400 degree might be damaging for the market.

Following heavy Put writing at 17,400 and 17,500 ranges, strike value 17,500 confirmed highest Put OI. The approaching week is prone to see Nifty try and stabilise with a optimistic bias. The 17,650 and 17,750 ranges will act as potential resistance factors, whereas assist will are available in at 17,400 and 17,310 ranges.

The weekly RSI stood mildly overbought on the 73.30 degree. The RSI was impartial and didn’t present any divergence towards the value. The weekly MACD continued to be bullish and traded above the Sign Line. A big Black Physique emerged on the candles; it mirrored the directional consensus among the many market individuals that prevailed throughout the week. Sample evaluation confirmed Nifty was nicely above the higher rising development line assist. Within the occasion of continued corrective exercise, if Nifty checks this development line assist, the subsequent assist might emerge within the 17,350-17,400 space. This development line is drawn from the low level of March 2020 and joins the following increased bottoms.

All in all, it’s largely anticipated that whereas defending the 17,350-17,400 zone, Nifty might keep in an outlined vary and proceed to consolidate. The latest value motion noticed Nifty’s helps being dragged decrease to 17,800 from 17,950 degree. So, the 17,800 degree would be the most instant resistance if Nifty makes an attempt to realize some stability and pulls itself again. Over the approaching days, we anticipate a selective sectoral outperformance out there. There are increased probabilities that choose banks, auto, pharma and PSE shares will proceed to do nicely. Shorts needs to be averted and purchases have to be stored extremely stock-specific within the coming week.

In our take a look at Relative Rotation Graphs®, we in contrast numerous sectoral indices towards CNX500 (Nifty500 Index), which represents over 95 per cent of the free float market cap of all of the listed shares. The evaluation confirmed a whole lot of inherent power out there. The IT and Realty Indices are positioned contained in the main quadrant. Aside from this, Nifty Vitality Index and the Financial institution Nifty have rolled contained in the enhancing quadrant. This confirmed their probably relative underperformance towards the broader market.

Together with this, Media, Non-public Banks, PSE, PSU Financial institution and Auto Indices are all buying and selling contained in the lagging quadrant. Nonetheless, all these indices are displaying a really distinct enchancment of their relative momentum towards the broader Nifty500 Index. All these teams are prone to put up a resilient present over the approaching days. The Nifty Providers Sector Index has rolled contained in the enhancing quadrant, whereas Nifty Commodities and the Steel indices are contained in the weakening quadrant. They present no signal of any enchancment of their relative momentum. Some stock-specific remoted performances could also be seen, however the indices are prone to comparatively underperform the broader market.

Vital Notice: The RRG™ charts present the relative power and momentum in a gaggle of shares. Within the above chart, they present relative efficiency towards the Nifty500 Index (broader market) and shouldn’t be used instantly as purchase or promote alerts.

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