INSUBCONTINENT EXCLUSIVE:
Before the start of this week, we had highlighted the possibilities of Nifty facing overhead resistance while inching higher
We had also expected the week to remain more volatile than normal
In line with this forecast, the week that went by remained highly volatile and the index oscillated in a wide range.
While facing resistance
in the overhead resistance area, the index took a sharp knock on the last trading day of the week (Friday), but still managed to end the
week with just a modest loss
The benchmark Nifty lost 51.45 points (-0.48 per cent) on a weekly basis.
The Indian market has been greatly resilient to global weakness
The Dow Jones Industrial Markets have lost over 1,600 points (or 6.87 per cent) in the previous week
Other European and Asian peers, too, have remained weaker while the Indian markets have relatively outperformed.
Despite this relative
resistance as the index deals with the falling trend line, which it has not moved past.
The upsides, if any, are likely to remain capped, as
the coming week will be a truncated one, with December 25 being a trading holiday
Further, we have expiry of the current derivative series to deal with.
We expect a soft start to the trade on Monday, and expect Nifty to
stabilise and respect important support levels that are present on the daily charts
volatility has made the range wider for the coming week
The Relative Strength Index, or RSI, on the weekly charts stood at 49.7248 and it remains neutral, showing no divergence against the price
The weekly MACD remains bearish and trades below its signal line
The PPO, too, is negative; and along with MACD, it is seen sharply narrowing its trajectory towards turning positive.
Apart from a Black
Body that has emerged on the candles, no significant formations were seen
Pattern analysis on the charts showed Nifty has continued to face resistance at the falling trendline pattern
This overhead resistance line begins from the high of 11,760 and joins the next lower top near 10,950
This being falling in nature, it keeps shifting the subsequent resistance area for Nifty lower with each passing week.
Overall, despite
Indian market having relatively outperformed its global peers, it is unlikely that we will see a significant upward move from the current
There will be pullbacks, but they would remain capped and technical in nature
For a significant upward move to resume, it would be important for the index to move past the falling trendline pattern resistance
Until this happens, we will continue to see all upward moves meeting overhead resistance and resulting in bouts of profit taking.
We advise
investors to continue protecting profits vigilantly at higher levels and keep making defensive purchases in modest quantities at each
corrective downside that the market offers
A cautious view is advised for the coming week.
In a look at the Relative Rotation Graphs, we compared various sectors against CNX500, which
represents over 95 per cent the free float market cap of all the listed stocks.
A study of the Relative Rotation Graphs (RRG) paints a
Except for the metal and PSE (public sector enterprises) indices, no other index is in lagging the quadrant
Major indices such as the ones for infrastructure, PSU banks, Bank Nifty, Nifty MidCap50 and financial services remain comfortably in the
leading quadrant and they are likely to keep outperforming the broader markets on a relative basis
The FMCG index is on the verge of entering the leading quadrant after continued improvement in the momentum.
The realty, consumption indices
and Nifty Junior (Nifty Next 50) have further advanced into the improving quadrant
The Auto Index, too, had entered the improving quadrant after a prolonged under-performance against the broader market
These groups are likely to remain resilient to weakness, if any, and may see stock-specific out-performances.
IT, energy and pharma have
remained in weakening quadrant and are likely to consolidate at current levels
These sectors will also continue to witness isolated stock-specific performance as they attempt to halt their corrective moves and possibly
consolidate.
Important Note: RRGTM charts show you the relative strength and momentum for a group of stocks
In the above Chart, they show relative performance as against NIFTY500 Index (broader market) and should not be used directly as buy or sell
