Dalal Street Week Ahead: Any runaway move for Nifty highly unlikely in holiday-truncated week

The last trading session on Friday remained somewhat stable wherein Nifty attempted a technical rebound to post some gains. But speaking on a larger note, the markets consolidated on expected lines. After oscillating back and forth in a 514-point range, the index ended with a marginal gain of 113.90 points (+0.64%) on a weekly basis.

The coming week is a short 3-day week with Thursday and Friday being trading holidays on account of Dr. Babasaheb Ambedkar/Mahavir Janayti and Good Friday, respectively. In this short week, there are all chances that Nifty stays in a capped range, shows limited upsides, and does not show any runaway up move.

The weekly options data show high call writing activities between 17,800-18,000 levels. This means that there are very little chances of Nifty moving past this zone in the next week. The downsides too may be limited; Nifty is likely to continue to stay in a defined consolidation range.

Volatility came off a bit. IndiaVIX declined by 4.05% to 17.69 on a weekly basis. The coming week is expected to see the levels of 17,880 and 18,000 playing out as strong resistance points. The supports come in at 17,680 and 17,550 levels.

The weekly RSI is 56.80; it stays neutral and does not show any divergence against the price. The weekly MACD is bearish and below the signal line. However, the narrowing slope of the histogram suggests that the indicator may show a positive crossover in the coming days.

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A Spinning Top occurred on the candles. A spinning top occurs when there is little difference between the opening and the closing levels of the bar. This denotes tentative and indecisive behavior of the market participants. This Spinning Top is almost a Doji given the very little difference between the opening and the closing levels of the index.

The pattern analysis suggests that though Nifty is now above all the key moving averages, it has resisted the falling trend line resistance. This trend line is drawn from the high point of 18,604 and joins the subsequent lower tops.

Given the short and truncated trading week, any runaway move in the markets is highly unlikely; in fact, the markets are expected to continue exhibiting a tentative and cautious mood through the week.

With Thursday being holiday, the weekly options expiry would take place on Wednesday and this too will influence the trade. It is recommended that the market participants must stay light on positions. So long as Nifty is below the 18,000 level, it remains highly vulnerable to profit-taking bouts from higher levels.

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The analysis of Relative Rotation Graphs (RRG) shows that the coming shortened week is likely to belong to the defensive stocks. Nifty Metals and the Commodities indices stay in the improving quadrant, these groups are likely to relatively outperform the broader Nifty500 index. Apart from this, the energy, PSE, and Bank Nifty are also inside the leading quadrant. However, they are seen giving up on their relative momentum.

Nifty Auto index has rolled inside the weakening quadrant. It may continue to relatively underperform the broader markets. On the other hand, Nifty IT has also rolled inside the weakening quadrant, but it has rolled from the lagging quadrant. Given the rapidly improving relative momentum of the IT index, this group may further strengthen its relative performance against the broader markets. Nifty Media and the services sector index also remains in the weakening quadrant.

Nifty Financial Services index has rolled inside the lagging quadrant. NIFTY Midcap 100 and the Realty Indices are also inside the lagging quadrant; they are seen improving their relative momentum.

Nifty consumption has rolled inside the improving quadrant. Along with pharma and the FMCG pack, the consumption space may also offer resilient performance going ahead from here.


Important Note: RRGTM charts show the relative strength and momentum for a group of stocks. 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 Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at [email protected])