Analyzing India

Week Ahead: NIFTY Set To React On These Lines Post Interim Budget


We mentioned in our previous weekly note that, due to expiry of the January series and interim budget, the markets would remain more volatile than usual over the past week. While the expiry day did not bring in any volatility, the last session of the week remained immensely volatile on expected lines. The NIFTY experienced some volatile swings before wrapping up the week with net weekly gains of 113 points (+1.05%).We had also projected that the week would have a wider trading range than usual. While looking at the finer details, we observe that, over the past week, the range of the NIFTY was 400 points,  wider than the 231-point range of the previous week. The index marked a similar high to the previous week, but had a lower bottom. On the positive side, the headline index has managed to remain above its 50-Week MA, which is presently at 10766.

It is normal for the markets in general to show euphoric moves while reacting to an important event like union budget. Though this was only an Interim Budget, markets will start reacting to it once the proposals are fully digested. Although the budget was a populist one, speaking on broad terms, it was also seen as a balanced one, with politics not brazenly taking precedence over economics.

We expect a stable start to the coming week, with the market making attempts to move past the all-important 10950 level that has acted as stiff resistance over the past few weeks. The 10950 and 11190 levels will provide resistance to the upside while supports come in at 10800 and 11650.

The weekly RSI is 52.6563; it remains neutral and does not show any divergence against the price. The weekly MACD is bullish and is trading above its signal line. No significant formations we observed on candles.

The markets are finding resistance at the 10950-mark on both daily and weekly timeframe charts. This has translated into a sideways consolidation on the weekly charts; for a reasonable up move to occur, moving past the 10950 level will remain critically important. We expect the market to continue making efforts to move past this level, but, in the process, it will need to keep its head above the 50-Week MA. A cautiously positive approach is advised for the coming week.

Sector Analysis for the Coming Week

In our look at Relative Rotation Graphs, we compared various sectors against the CNX500, which represents over 95% of the free float market cap of all listed stocks.

A look at the Relative Rotation Graphs presents some interesting insights. We may see some continued slowdown in the BankNIFTY, Financial Services and Consumption indexes, but these will likely continue to relatively out-perform the broader markets, along with the FMCG pack.

Additionally, we see the Energy pack sharply improving its relative momentum in an almost parabolic manner. This group will also remain one of the better performing groups. The Media, Auto and NIFTY Next 50 indexes are seen losing momentum and slowing down mid-way. The CNX IT index, meanwhile, is gaining in ratio but has lost relative momentum; it is advancing toward the weakening quadrant. The Pharma Index, however, has shown a steady improvement on the momentum front, despite remaining in the lagging quadrant.

The Metal index has lost further ground and shows no sign of any improvement. Apart from this, few stock-specific performances may be seen from the Infrastructure pack. 

Important Note: RRG™ charts show you the relative strength and momentum for a group of stocks. In the above chart, they show relative performance as against the NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.

Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst

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Milan Vaishnav
About the author: , CMT, MSTA is a qualified Independent Technical Research Analyst at his Research Firm, Gemstone Equity Research & Advisory Services in Vadodara, India. As a Consulting Technical Research Analyst and with his experience in the Indian Capital Markets of over 15 years, he has been delivering premium India-focused Independent Technical Research to the Clients. He presently contributes on a daily basis to ET Markets and The Economic Times of India. He also authors one of the India's most accurate "Daily / Weekly Market Outlook" -- A Daily / Weekly Newsletter,  currently in its 15th year of publication. Milan's primary responsibilities include consulting in Portfolio/Funds Management and Advisory Services. His work also involves advising these Clients with dynamic Investment and Trading Strategies across multiple asset-classes while keeping their activities aligned with the given mandate. Learn More
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