INSUBCONTINENT EXCLUSIVE:
After taking a breather a week before this one, the Indian equity markets resumed its downtrend again and ended this week with a net loss
With this week's decline, the Nifty has, as of now, declined nearly 35% on a closing basis
A week before this, Nifty had witnessed wide oscillation of over 1,500 points intra-week, but on the closing basis, the losses were capped
However this time, the situation was different
The range remained narrower that of 623 points; the index closed with a net weekly loss of 576.45 points (-6.66%)
At the present technical juncture, we need to take a look at a couple of points
Despite the ever-continuing fear and uncertainty over the COVID-19 pandemic, all global markets, including India, have shown some
possibilities of arresting the downside, or that of a measured technical pullback as they stand miserably oversold
The previous week also saw volatility declining significantly as the India Volatility Index, INDIAVIX, fell by 21.43% to 55.30
From the high, the INDIAVIX has come off over 30%, and this is a good sign which lays some ground for a technical pullback
The coming week would be a short 3-day trading with both Monday and Friday being trading holidays on account of Mahavir Jayanti and Good
The Indian markets are expected to see an uncertain start on Tuesday as the markets will open after a gap of one day and will adjust to the
Having said this, the levels of 8,190 and 8,430 will act as resistance, while supports will come in at 8,000 and 7,835 levels.
The weekly
RSI stands at 13.70; it continues to remain deeply oversold and well below 30
The RSI has marked a fresh 14-period low, which is bearish but remains neutral and does not show any divergence against the price
The weekly MACD is bearish and trades below its signal line
The pattern analysis shows some mild signs of the markets attempting a technical pullback again
This week had a lower top but much higher bottom; this signifies some respite from the downward pressure and also shows the low of the
previous week as a potential short term base for the markets
That being said, though some technical pullback cannot be ruled out, they will remain measured and limited in its extent given the break of
a major trend line by the Nifty
Off late, the volumes have remained on the lower side
This trend is likely to stay over the next couple of days as well
The coming week, which is a highly truncated one, will also see a dearth of volumes, which may make it difficult for Nifty to sustain any
In any case, given the current technical setup, we recommend avoiding shorts at current levels
The downsides may be used to make moderate purchases
Without taking any significant directional exposures, a cautiously positive outlook is advised for the week.
The review of Relative Rotation
Graphs (RRG) shows how the following sectors continued to outperform the broader markets on the expected lines relatively and how they are
likely to continue doing so in the coming week as well.
The pharma, FMCG, consumption, and IT indexes appear to be marching firmly in the
These indexes are also maintaining their relative momentum and will continue outperforming the broader Nifty500 index relatively
The Infrastructure index has crawled in the improving quadrant and looks to have consolidated itself
Stock-specific outperformance cannot be ruled out from this group.
The Nifty PSE and the Nifty Energy indexes have arrested their
They are attempting a positive rotation towards the improving quadrant
However, they are yet to complete their bottoming-out process entirely.
All other key indexes like Nifty Bank, Realty, Auto, Metals,
Commodities, Services, Financial Services, PSU Bank, and Media are continuing to lose their relative momentum while remaining in the
weakening and lagging quadrants
These groups will underperform the broader markets collectively.
Important Note: RRGTM charts show the relative strength and momentum for a
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 milan.vaishnav@equityresearch.asia)
