INSUBCONTINENT EXCLUSIVE:
The Indian equity market had a volatile week and ended on a flat note
In our previous weekly note, we had mentioned about the possibilities of the market stalling its upward move and showing some corrective
Had it not been for this last-hour pullback, the week would have on a negative note.
Headline Nifty50 settled the week with a net gain of
42.05 points or 0.36 per cent.
Looking at the coming week, the market is placed on a tricky turf
On one hand, the market is simply refusing to correct despite all available ingredients; while on the other hand, there is a high and
usually unsustainable premium of 90-points on Nifty futures to deal with, which remains at a three-year high, and there is persistent
negative divergence on the daily chart.
Unless the market sees some healthy correction in the coming days, the unabated upward moves are
Going into the coming week, it would be necessary for market participants to stick to traditionally defensive stocks sectors like IT and
pharma.
We expect a stable start to the week, but the market is likely remain vulnerable to bouts of profit taking at higher levels
The 11,760 level still remain the all-important resistance point
Unless this point is taken out, we do not expect any runaway rally to occur.
Nifty is expected to see the 11,760 and 11,845 levels act as
likely resistance points in the coming week
Supports should come in much lower at 11,510 and 11,420.
The weekly RSI stands at 67.7869
It has marked a fresh 14-period high, but does not show any divergence from the price
The weekly MACD continues to be bullish as it trades above the signal line
A Doji Star emerged on the candles after an upward move and can potentially have bearish implications.
Nifty has ended the week above the
Though this may result in a continued upward move, the bands remain wider than normal
In the current case, the most likely scenario is that Nifty will continue in the same trading range where it currently trades
We may also see Nifty pull back inside this band.
We strongly recommend adopting a highly stock-specific approach in this market
Exposure should be kept modest and it should be limited to traditionally defensive stocks
We might see limited outperformance in stocks and sectors only from specific pockets.
While we should continue to protect profits vigilantly
at higher levels, a highly cautious approach is advised for the coming week.
In our look at the Relative Rotation Graphs, we compared
various sectors against CNX500, which represents over 95 per cent of the free float market-cap of all the listed stocks.
A review of
Relative Rotation Graphs (RRG) shows that a relative out-performance is likely only from limited pockets in the coming week
Bank Nifty, Nifty, Energy, FMCG, Consumption, Financial Services and Services indices are all losing relative momentum against the broader
CNX500 index.
The CPSE, Pharma, Metal and Media groups have posted good performance and are seen improving relative momentum
They are currently in the improving quadrant and are likely to consolidate and improve their momentum going ahead
The realty pack is placed firmly in the leading quadrant
All these groups, along with the metals pack which has moved into the improving quadrant, are likely to post good relative outperformance
against the broader CNX500.
The PSU Bank Index has moved back inside the weakening quadrant from the lagging quadrant
This sudden turn may suggest a return of momentum, but it may also happen that the PSU Bank index shall consolidate offering some
stock-specific performance.
Important Note: RRGTM charts show relative strength and momentum for a group of stocks
In the above chart, they show relative performance as against Nifty500 Index (broader markets) and should not be used directly as buy or
