Dalal Street Week Ahead: Dalal Street Week Ahead: Markets can remain highly stock-specific; Important for Nifty to stay above 15700

The Indian stock market managed to recover half of what it had lost in the first week. Over the past five days, the markets traded largely positive and tested the previous support levels which they violated on their way.

The trade remained just as wide; nifty Gained 558.15 points at the end of the week. The index also retained some important support and this makes the coming week quite interesting and important. Headline index Nifty 50 closed with a gain of 405.75 points on a weekly basis after mainly positive behavior.

From a technical point of view, it is important to note that Nifty has kept the 100-week MA as support at the close. The 100-week MA is currently at 15357. After an intra-week decline below this point, Nifty has managed to recover from lower levels and closed above this crucial support. The 100-week MA remains an important support for the markets in the immediate short term.

Also, another technical factor to note is that Nifty has stopped its rally exactly near 15700; This is the double bottom support which Nifty breached on the downside. This could theoretically act as a resistance to the markets. In other words, any move above 15700 is likely to give some further strength to the markets. The coming week is likely to see a steady start; The 15830 and 16000 levels are likely to act as immediate resistance levels. Support comes at the 15530 and 15380 levels. The trading range is likely to be wider than normal.

weekly RSI is 40.50; It remains neutral and shows no difference towards the price. The weekly MACD is bearish and remains below the signal line. A white bodied candle went out; This upward sign indicates a directional consensus of market participants.

Pattern analysis of the weekly chart shows that the index has maintained this support on a weekly close basis, despite breaching the crucial 100-week MA. This 100-week MA is currently at 15357. On the upside, Nifty is approaching double bottom support, which it has breached along the way.

The derivatives data shows a potential trading range between the 15500-16000 levels.

However, for the markets to move higher, it will be important to move past and stay above the 15700 level. In other words, 15700 is likely to act as an inflection point; Any move above this level will push the market higher. Similarly, if Nifty is not able to move beyond 15700 mark, then the market can remain firmly in some range. Overall, it is expected that the market may remain highly stock-specific, with both high and low beta stocks from select pockets performing well. A cautiously positive approach to the day is advised, avoiding shorts.

In our look at the Relative Rotation Graph®, we compared various sectors against the CNX 500 (Nifty 500 Index), which represents over 95% of the free float market cap of all stocks listed.

An analysis of the Relative Rotation Graph (RRG) reveals that Nifty Bank, Auto, FMCG and Consumption Indices remain firmly in the leading . These sectors are likely to outperform the broader Nifty 500 index.

The Nifty Infrastructure Index is also inside the leading quadrant; However, it appears to be reducing its relative momentum against the broader markets.

Nifty Pharma, Energy, Commodities and PSE indices are in the weak quadrant. Stock-specific shows cannot be ruled out, but overall these areas may show some inclination to give relief.

Nifty has turned inside the metal lagging quadrant. This is likely due to a relatively weak performance in the broader markets. Other than this, PSU Bank, realty, and media indices also looked sluggish inside the lagging quadrant. Nifty IT and Services Sector Index is inside the lagging quadrant but these groups are trying to correct their relative momentum against the broader markets.

Important Note: RRGTM charts show the relative strength and momentum for a group of stocks. In the above chart, they show relative performance relative to Nifty 500 Index (Broad Market) and should not be used as direct buy or sell signals.

Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and Founder of Equity Research.Asia and Chartwizard.ae and is based in Vadodara. he can be reached here
milan.vaishnav@equityresearch.asia