INSUBCONTINENT EXCLUSIVE:
In the previous weekly note, we had raised concerns as Nifty had slipped below its 20-week moving average and the volatility index, VIX
traded at a multi-month low
It was expected that volatility was likely to increase and the market would drift lower
performance on the last trading session of the week saw it end with losses on a weekly basis
The headline index ended the week 133.25 points, or 1.15 per cent, lower.
The market is precariously poised once again for the week ahead
India VIX has risen 4.31 per cent to 12.52 and continues to remain at one of its lowest levels of recent times
Although Nifty has rested on the pattern support in the form of a nine-month-long rising trend line, this is the lower trend-line of the
secondary channel that the index has formed since October 2018
On the other hand, any breach of this level will create the possibility of Nifty testing its 50-week moving average.
Nifty might see a mild
technical pullback in the coming week as the market is once again modestly oversold
However, the 11,375-11,425 zone will become a crucial area to watch, and any breach of this zone will make the market lose some ground.
The
11,480 and 11,590 levels will be key resistance for Nifty while supports will come in at 11,310 and 11,180
The Relative Strength Index or RSI on the weekly chart stood at 48.8153
The RSI has marked a fresh 14-period low, which is a bearish signal, and it also shows a bearish divergence against price
The RSI has marked a new 14-period low while Nifty has not done so
The weekly MACD remains bearish and trades below its signal line.
Nifty had formed a secondary upward rising channel after it breached the
primary 30-month-long rising channel in October 2018
Pattern analysis of the weekly charts showed as of today, the index has taken support on the lower trendline of this secondary
We expect rollover-centric activities to dominate trade
A lot of short covering and long unwinding was seen over the past couple of days and the market remains relatively light compared with that
There is room for a mild technical pullback in the market
However, this pullback, if at all it occurs, would just be a swing trade and should not be chased.
We recommend keeping exposures at modest
levels and approaching the week with a good amount of caution.
In our look at Relative Rotation Graphs, we compared various sectors against
the CNX500 (Nifty500) index, which represents over 95 per cent of the free float market-capitalisation of all the listed stocks.
A review of
the Relative Rotation Graphs (RRG) showed sharp polarity between the sectors that are either likely to remain resilient or relatively
outperform the broader market and those which are expected to remain weak.
Bank Nifty, Financial Services, Services Sector, Infrastructure
and Realty indices are in the leading quadrant and are likely to show resilience to any downsides
In the event of any rise, they may relatively outperform the broader market
The CPSE index is also in the leading quadrant, but it is heading downward while steadily losing its relative momentum.
Along with the above
sectors, Consumption and FMCG indices are also moving higher in the improving quadrant
The PSU bank and media indices appear to be improving their relative momentum even as they continue to be in the lagging quadrant.
Apart
from this, IT, pharma, auto and metals indices continue to lose relative momentum
These packs are likely to relatively under-perform the broader market.
Important Note: RRGTM charts show the relative strength and momentum
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 Consultant Technical Analyst at Gemstone Equity Research - Advisory Services, Vadodara
