From a technical perspective, in the week before this one, the Nifty had tested the 20-week MA and had taken support by rebounding from that point. The 20-week MA, which currently stays at 19,387, remains an important support for the market on a closing basis. The market will consolidate as long as it keeps its head above this point. Any violation of this level will make the market incrementally weaker.
The volatility gauge, INDIA VIX, showed a marginal increase of 3.08% to 10.62 on a weekly basis. It remains within a striking distance of 10.14, the lowest level seen on this indicator so far. This remains a point of concern as this will keep the market exposed to profit-taking bouts.
Monday will likely see a tepid start to the week as the levels of 19,880 and 19,950 are expected to act as potential resistance points. The supports come in at 19,500 and 19,380 levels.
The weekly RSI is at 62.33. It stays neutral and does not show any divergence against the price. The weekly MACD is bearish and trades below signal line. A bullish engulfing candle has emerged, however, it is of little significance as it has emerged with an overall uptrend after just a minor decline.
The pattern analysis of the weekly charts shows that the market are unlikely to see any runaway upmove. Any extension of the move on the higher side will find resistance to the upward-rising trend line which begins from 18,900 and joins subsequent higher tops.
On the lower side, Nifty has important support at 20-week MA currently placed at 19,387. As long as this is protected, the index will consolidate in a defined range and shall get incrementally weaker if this important support level is violated on a closing basis.
Overall, it is the time to get cautious on the market. Even if the upmove gets extended over the coming days, it would be prudent to use such moves on the upside to vigilantly protect profits at higher levels. Fresh purchases should be kept highly selective and within defensive and low-beta pockets. While keeping overall exposures at modest levels, a cautious outlook is advised over 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.
AgenciesAgenciesRelative Rotation Graphs (RRG) show that the Nifty Pharma index which was inside the leading quadrant until now has rolled inside the weakening quadrant. Besides this, the IT, Energy, Midcap100, Media, Metal, PSE, PSU Bank, and Infrastructure indices are also inside the leading quadrant. Out of these groups, except PSE, PSU Bank and Infrastructure indices, all others are showing a slowdown and paring of their relative momentum against the broader market. Along with Pharma, Realty and Auto indices are also inside the weakening quadrant. However, both of these indices are showing improvement in their relative momentum.
Nifty Bank and Financial Services indices are seen languishing inside the lagging quadrant. The FMCG and the Consumption index are also inside the lagging quadrant, but they are seen improving their relative momentum against the broader Nifty500 index.
The Nifty Commodities index and Services Sector index are inside the improving quadrant.
Important Note: RRGTM charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against Nifty500 Index (Broader market) and should not be used directly as buy or sell signals.
Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based in Vadodara. He can be reached at milan.vaishnav@equityresearch.asia
