This also pared Nifty losses for May. The headline index ended with a net loss of 279 points, or 2.84 per cent, on a weekly basis. Two of the three sessions of the week were dominated by rollover-centric trades. The week also saw index and stock futures dip into considerable discount against the spot. Volatility continued to drop as volatility index, INDIA VIX, came off by 6.66 per cent to 30.22 on a weekly basis.
The 9,000-9,050 zone has now become a short-term base for Nifty and we expect the market to consolidate in a broad range with a positive bias. On Monday, Nifty is likely to see a quiet start to the week. The trading range is now expected to remain wide with the 9,360 and 9,875 levels acting as resistance points, while supports will come in at 9,510 and 9,365 levels.
The weekly RSI stood at 42.67. It has made a fresh 14-period high, which is a bullish indication. The RSI continued to remain neutral as it did not show any divergence against the price. The weekly MACD remained bearish, as it traded below the signal line. However, the slope of the histogram suggested a sharply diminishing momentum on the downside, which is, in a way, a positive signal for the near term. A white body appeared on the candles. Apart from this, no other significant formations were seen.
Pattern analysis presented an interesting picture. After violating the decade-old trend line, Nifty pulled back sharply from lower levels, but halted exactly at the trend line that it had violated. At its current phase, Nifty appears to be trying to move to that resistance point again.
From a technical perspective, a risk-on environment is building up. Given such a setup, we will expect Nifty to attempt to move higher after every decline. However, the index has risen over 550-points in three consecutive days, and this may lead to some profit taking or wide-range consolidation at higher levels.
Investors are advised to protect profits at higher levels. In the event of any move towards the 9,800-9,950 zone, profits should be protected vigilantly, and aggressive buying should be avoided. One should continue with a cautious approach in the week ahead.
In our look at Relative Rotation Graphs®, we compared various sectoral indices against CNX500 (Nifty500 Index), which represents over 95% of the -float market cap of all the listed stocks.
The review of the Relative Rotation Graphs (RRG) showed the IT sector, along with FMCG and Consumption appears to be taking a breather. Despite staying in the leading quadrant, they have lost their relative momentum sharply. These sectors may relatively outperform the broader market, but their contribution may diminish. The Energy, Pharma and Infra sectors remain firmly in the leading quadrant, and they will continue to outperform the broader Nifty500 index relatively. Bank Nifty, PSU Banks, Financial Services, Realty and the Service sector indices continue to languish in the lagging quadrant. They may perform individually. But on a relative basis, they are set to underperform the broader market on a relative basis. The Metal and Media indices are in the process of consolidating by arresting their underperformance.
The Auto Index has advanced firmly in the improving quadrant. It has completed its bottoming out process, and is likely to join PSE and Commodities groups in bettering their performance on the relative basis against the broader market.
Important Note: RRGTM charts show 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 is a Consultant Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])
