A week ago: NIFTY is about to consolidate. The index may finally be starting to perform relatively well | India Analysis

The market continued its upward trend. Following a strong trending week, Nifty not only closed at a lifetime high but also closed on the rise for the sixth straight week. The market posted decent returns despite some signs of consolidation later in the week. The markets have been choppy over the past two days. However, on a weekly basis, the volatility represented by the INDIA VIX remained unchanged. India Vix closed at 12.47, up 0.71% on a weekly basis. The scope of transactions continued to expand. The index has fluctuated in a range of 498.35 points over the past five sessions. Benchmark index Nifty50 closed with a significant gain of 701.50 points (+3.46%) on a weekly basis.

From a technical perspective, last week created a gap. In the process, the index moved the support zone higher from 20000 to the 20450-20550 level range. Nifty also closed above the upper Bollinger band. Even if there is a temporary decline within the bands, the market could continue its upward trend further, even with the possibility of some consolidation from current levels. NIFTY’s action towards 21000 level is very important. If the index can break out of this level and stay above it, it will open up more room for the market to rise. However, until this happens, the market is looking to enter a period of consolidation and a brief respite after some very strong moves over the past few weeks.

Monday is likely to start quietly. The 21090 and 21265 levels are likely to act as potential resistance points. Support is provided at the 20700 and 20580 levels. The trading range is likely to be wider than usual.

Weekly RSI is 72.44. It hit a bullish new 14-period high. It remains neutral and does not show any difference in price. The weekly MACD showed a positive crossover. It is currently a bull market and is trading above the signal line.

Pattern analysis of the weekly charts shows that Nifty has not only touched a lifetime high but has also broken out of the rising channel by a gap. In the process, the index raised the support line from the 20000 level to the 20450-20550 area. As long as the index keeps his head above this area, the breakout and trend will remain intact.

With the index closing above the upper Bollinger Band, the chances of the index rising further increase. But considering the kind of surge the Nifty has seen, it has been slightly ahead of the curve. In this case, if we don’t subtract 21000, we can see the market consolidating in some range.

Overall, it is a time of need for defense and caution. Protecting profits at current levels is of utmost importance. New purchases can be made very selectively, but the focus should also be on protecting profits at current levels and higher levels. Defensive pockets like FMCG, IT, PSE, etc. may continue to find traction in the future. Profits must be protected at a higher level while being extremely selective about new purchases.

Next week’s sector analysis

With Relative Rotation Graphs®, we compared various sectors with the CNX500 (NIFTY 500 Index), which represents over 95% of the free float market capitalization of all listed stocks.

Relative Rotation Graph (RRG) shows that Nifty Realty, PSE, Infrastructure, Energy and Commodities indices are within the major quadrants. These groups are likely to relatively outperform the Nifty 500 index in the coming week.

Nifty Auto Index, which was in the bearish quadrant, appears to be losing its momentum. Additionally, Midcap100, PSU Bank, Media, Pharma and Metal indices continue to drift inside the bearish quadrant. In these groups, you may see individual stock shows, but overall they may be slower in terms of relative performance.

NIFTY IT index rolled inside the lagging quadrant. Now, it could be a relative underperformance in the broader market.

Nifty Bank index has finally moved inside the improving quadrant. This could end the sector’s relative underperformance. Apart from this, consumption, FMCG, financial services and service sector indices are also included in the improving quadrant.

Important note: RRG™ charts show the relative strength and momentum of groups of stocks. The above chart shows relative performance against the NIFTY500 index (broad market) and should not be used directly as a buy or sell signal.

Milan Vaishnav, CMT, MSTA

Consulting Technology Analyst

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