INSUBCONTINENT EXCLUSIVE:
While trading on the anticipated lines, the domestic equity market continued to consolidate and saw tremendous volatility owing to the
geopolitical tension in West Asia
Nifty traded in a wider-than-usual range and ended the week on a relatively flat note
The index witnessed close to 400 points movement on either side and finally closed with a weekly gain of 30.15 points, or 0.25 per
cent.
Just like the previous week, we may see geopolitical tensions continue to hunt the market in the week ahead, but news flow is unlikely
to be as intense as it was last week
Coming back to technical charts, the loss of momentum is resurfacing and remains evident on the charts
Volatility Index, India VIX, rose again by 10.89 per cent during the week to 14.08
Over the past couple of days, India VIX has gained over 45% from its recent lows
F-O data continues to show upsides remain capped for the immediate short term.
The market is likely to see a soft start to the week
The 12,330 and 12,400 levels will continue to act as strong overhead resistance for Nifty
Supports will come in lower at 11,990 and 11,910 levels
Any move on the downside is likely to be accompanied by increased volatility.
The Relative Strength Index, or RSI, is at 65.49 on the weekly
It remains neutral and does not show any divergence against price
The weekly MACD remains bullish and trades above the signal line.
On the candles, a Hanging Man pattern has emerged
Though the current pattern is not a classic Hanging Man as it has a small upper shadow, it may potentially stall the present up-move
This will require confirmation on the next bar on the charts.
Pattern analysis of the weekly charts showed Nifty has not made any
incremental high on a closing basis
Also, it remains slightly overstretched on the charts as the Stochastic stays highly overbought
Lack of internal strength is visible, as the RSI is not moving higher with the usually accompanied strength.
The week gone by was the fourth
in a row when Nifty halted its advance near the current levels
Unless these levels are taken out comprehensively, the index is unlikely to have any sustainable up-move in the coming days
Since the market is likely to remain vulnerable at higher levels, it would be prudent to avoid excessive leverage and continue protecting
represents over 95% of the free-float market-cap of all the stocks listed.
The review of Relative Rotation Graphs (RRG) shows that the
financial groups are expected to outperform the broader Nifty500 Index relatively
Bank Nifty and the Financial Services index remain in the leading quadrant, and along with these two groups, Realty and Services Sector
groups also remain in the leading quadrant.
Besides this, PSU banks, pharma and media packs have shown a sudden loss of momentum mid-way
If this trend continues, we will see the rotation of these sectors getting damaged abruptly, and some under-performance may creep into
them.
Apart from this, the PSE, infrastructure, consumption, FMCG and energy indices are drifting further into the lagging quadrant and are
likely to underperform the broader Nifty500 index on a relative basis.
The Auto Index has slipped into the weakening quadrant and it appears
On the other hand, the IT pack is seen improving on its relative momentum even as it remains in the lagging quadrant
It appears to be in the process of bottoming out.
Important Note: RRGTM charts show the relative strength and momentum for a group of stocks
In the above chart, they showed relative performance against the Nifty500 index (broader market) and it 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,
He can be reached at milan.vaishnav@equityresearch.asia)
