Weekly Outlook: NIFTY’s upside may be limited. View environmental changes by sector | India analysis

It was expected that although the market’s technical downtrend during the last trading week may be extended, NIFTY may still continue to face corrective pressure at higher levels. The last trading day witnessed exactly this scenario. The market initially extended the technical pullback and then extended the uptrend. But at the same time, the market was under strong selling pressure on the last trading day of the week. While NIFTY fluctuated in a range of 427 points, a sharp decline in volatility was noticeable on the technical side. India VIX fell 18.82% to 10.93. The headline index, NIFTY 50, closed with a net gain of 272.95 points (+1.23%) for the week.

Another truncated week is upon us due to the trade holiday on Wednesday (May 1). maharashtra day. The market currently remains in a defined trading range with the 20-week MA located at 21994 acting as immediate support at the close. On the upside, the previous week’s high is expected to continue to offer strong resistance. In short, as long as Nifty can defend the 21950-22000 levels, it will remain range-bound. A violation of this support zone will cause the market to gradually weaken.

The 21615 and 21730 levels are likely to act as resistance points next week. Support lies at the 22100 and 21900 levels.

Weekly RSI is 64.98. It remains neutral and does not show any difference in price. Weekly MACD is trending lower and trading below the signal line. A spinning top occurred on the candle. This means indecisiveness among market participants. The Bollinger Band appears to be narrowing. This is due to reduced volatility over the past few weeks, which should help keep the market in a tight, defined range.

Pattern analysis of the weekly chart shows that the 20-week MA located at 21994 is the most immediate support for Nifty as of the close. A violation of 21950-22000 could lead to further weakness in the index. The market remains vulnerable to high levels of selling pressure. There is unlikely to be a runaway uptrend until Nifty clearly crosses the 21650-21700 zone.

Overall, we continue to see the market remaining in a defined trading range with the 21950-22000 area acting as immediate support. Importantly, because VIX levels are low, market participants should be cautious of spikes that could negatively impact the market. It is worth noting that the low level of VIX is due to reduced volatility, which reflects complacency among market participants. Major market highs often occur when the VIX remains at its lowest levels for an extended period of time. In the current situation, it is of utmost importance that unless Nifty forms new highs, any upward movement should be exploited to protect profits at higher levels. Any new purchases should be made in defensive pockets or in stocks that are enjoying strong relative strength compared to the broader market. Overall, a cautious approach is recommended for the upcoming truncated week.

Next week’s sector analysis

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

Relative Rotation Graph (RRG) shows that Nifty Metal, Consumption and Auto Index are within the major quadrants. Among these, the Auto index is showing relative momentum, but these groups are likely to relatively outperform the Nifty 500 index.

Nifty Commodities, Pharma, PSU Banks and Infrastructure indices entered the bearish quadrant. Nifty Realty, Energy, Midcap 100 and PSE indices are also within the bearish quadrant. Although individual performance may emerge within these groups, relative performance is expected to slow.

The Nifty Media Index is within the lagging quadrant along with the FMCG Index and both groups are showing sharp improvement in their relative momentum to the broader market. Nifty IT index continues to slump within the lagging quadrant.

Nifty Financial Services, Services Sector and Bank indices are within the improving quadrant. They can be seen building up relative performance compared to the broader market.

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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