Dalal Street Week Ahead: Nifty 50 Poised for Short-Term Recovery?

On the back of one of the main FII massive sales observed in recent times, markets It succumbed to strong corrective pressure throughout the week and ended the week on a very weak note. He ingenious 50 remained under selling pressure throughout the week; At no time did he show any intention of setting up a technical setback. While weakness persisted across the five trading sessions, the trading range also widened.

He Skilled was found to have oscillated in a range of 1167 points for the last five days. As a result, there was also an increase in volatility; India’s VIX rose 18.10% to 14.13 week on week. The benchmark Nifty 50 index closed with a deep weekly cut of 1,164.35 points (-4.45%).

We have obvious reasons such as money flowing from Indian markets to
Chinese markets, geopolitical tensions in the Middle East and SEBI announcing changes in the derivatives trading landscape to write about as we discuss and assign reasons for market declines.
it was trading almost 10% above its 50-week MA. Therefore, even the slightest pullback could have triggered violent pullbacks from higher levels. Despite the kind of decline we have seen in the last few days, the Nifty has not even tested the nearest 20-week MA, which currently stands at 24441. This speaks volumes about how far ahead the markets had been. expectations. curve.Derivatives data suggests that markets may try to find support at the 25,000 levels. In addition to being a psychologically important level, the 25,000 strikes not only have the highest PUT OI as of now, but also have a very negligible existence of Call OI. Therefore, even if we continue with an overall bearish trend, some minor technical bounce from current levels cannot be ruled out. Overall, a stable start to the week is expected and the 25300 and 25450 levels will act as resistance. Supports are expected to reach 24910 and 24600.

The weekly RSI is 59.70; It has crossed below 70 from an overbought zone which is bearish. It remains neutral and does not show any divergence with the price. The weekly MACD appears to be on the verge of a negative crossover, as evidenced by a narrowing histogram. A large bearish candle that emerged hints at the type of strong selling pressure seen throughout the week.

Pattern analysis shows that despite the type of decline we have seen, the primary trend remains intact. On the daily chart, we have tested the 50-DMA; On the weekly chart, we have not even tested the nearest 20-week moving average. As long as we are above the 24000-24400 zone, there is little chance of the primary uptrend being interrupted.

All in all, from a short-term technical perspective, it would be crucial to watch Nifty’s performance against the 25000 levels. If the Nifty has to find some ground and establish a base, it will have to keep its head above 25000 levels. . Any violation of this level at the close would lead to further weakness in the index. Then, the 20-week MA levels may be tested in the coming days.

As we go through this turbulent phase, it is recommended to reduce highly leveraged positions and continue investing in low beta defensive stocks.

While remaining mindful in managing risks, a very cautious approach is recommended over the coming week.

In our Relative Rotation Graphs® analysis, we compare various sectors to the CNX500 (NIFTY 500 Index), which represents more than 95% of the free float market capitalization of all listed stocks.

Relative Rotation Charts (RRG) show that Nifty IT, Pharma, Consumer, Services and FMCG indices are within the main quadrant. However, a couple of them are showing some reduction in their relative momentum. However, generally speaking, these groups can show some resilience and relatively outperform the broader markets.

The Nifty Midcap 100 index has moved within the weakening quadrant. Apart from this, the Nifty Auto is also within the weakened quadrant and is seen rolling towards the lagging quadrant.

The Nifty PSE index has moved within the lagging quadrant. Together with him
The infrastructure index, which is also within the lagging quadrant, will relatively underperform the broader markets. Nifty Bank, Energy, Realty, Metal, PSU Bank, Financial Services and Commodities index are also in the lagging quadrant.

However, all of them are seen improving their relative momentum against the broader Nifty 500 index.

The Nifty Media Index is the only one within the improvement quadrant; however, it is seen as rapidly giving up its relative momentum versus the broader markets.

Important Note: RRGTM charts show the relative strength and momentum of a group of stocks. In the chart above, they show relative performance against the 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 in Vadodara. He can be contacted at [email protected]