With a 3-day working week, the markets moved along expected lines and stayed within a limited range. As anticipated, the NIFTY did not make any directional move, remaining within the 50-Week MA and 100-Week MA (as mentioned in our previous weekly note). After flirting with the 50-Week MA, which stands at 11140, and testing the weekly high of 11144, the headline index retraced and ended with a net weekly loss of 61.85 points (-0.56%).
As mentioned in the previous weekly note, the broader technical setup continues to be weak. However, a few indicators suggest that markets may attempt some up moves. Even if this happens, those moves will remain limited and the NIFTY will continue to face pressure at higher levels. On the downside, the 100-Week MA, which is presently at 10870, will remain a crucial level to watch over the coming days.
The global setup has improved a bit over the weekend, which may reflect on the opening of the Asian trade. The Indian markets are set to see a stable opening of the session and may remain range-bound in the initial trade. The levels of 11140 and 11230 will act as resistance points. Supports will come in at 11900 and 11810.
The weekly RSI is 40.9690; it remains neutral and does not show any divergence against the price. The weekly MACD is still bearish and trading below its signal line. No significant formations are seen on the candles.
The pattern analysis of the weekly chart shows that the NIFTY took support on the 100-Week MA, which is currently at 10870, after breaching the trend line of the secondary rising channel. Over and above this, it is observed that the index has also made a rounding-top formation, which could be potentially bearish going forward.
The coming week will see some attempts by the markets to stabilize and have some technical pullback. However, all such pullbacks, if there are any, will find resistance at the 50-Week MA, which is presently at 11140. The markets are vulnerable at higher levels, given the weak broader technical setup. This volatility, too, will remain ingrained and may rise in the coming days. While avoiding aggressive bets, a highly stock- and sector-specific approach is advised for the following week.
Sector Analysis for the Coming Week
In our look at Relative Rotation Graphs, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.
The review of Relative Rotation Graphs (RRG) shows that the sectors like IT, FMCG, and Consumption are likely to remain a safe haven for the investors and traders alike in the days to come. The FMCG and Consumption indexes have advanced firmly in the improving quadrant while maintaining their relative momentum against the broader markets. The IT pack is seen rapidly advancing toward entering the improving quadrant. The Media and Pharma Indexes are seen crawling in the improving quadrant and may outperform on a selective basis.
Though the Infrastructure, Realty, Financial Services and Services sector indexes remain in the leading quadrant, they all appear to be losing their relative momentum and heading lower. They may stay resilient, but may gradually give up if prolonged weakness persists.
The BankNIFTY, PSU Banks, PSE, CPSE, Auto, Metals and Energy packs are seen steadily losing their relative momentum against the broader markets. They are likely to continue to relatively underperform against the broader universe.
Important Note: RRG™ charts show you the relative strength and momentum for a group of stocks. In the above chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst,