market outlook: Dalal Street Week Ahead: Watch IT, infra, financial stocks for likely outperformance

Following a risky week, Nifty lastly took some breather, because it traded inside an outlined vary earlier than closing with modest losses. The primary half of the week noticed sharp corrective strikes from the upper ranges; whereas the second half of the week noticed Nifty rebound on the again of sharp quick masking, which took the markets once more in direction of the higher fringe of the consolidation range.

Regardless of greatest efforts, Nifty failed to maneuver previous its earlier highs and at last ended with a internet lack of 67.35 factors, or 0.42%, on a weekly foundation.

The weekly charts don’t current a great image. Nifty has fashioned a decrease prime and backside on the weekly charts. Importantly, it’s nonetheless under the rising pattern line help that it had violated within the earlier week.

This pattern line was a help earlier, now damaged, and has change into a resistance. It begins from the lows fashioned in March 2020 and joins the next greater bottoms. Given the rising nature of this pattern line, it’ll change into all of the tougher for the market to maneuver above it with every passing week.

Volatility remained unchanged; INDIA VIX rose by a marginal 0.49% to 11.7600. The approaching will see Nifty wrestle between 15,900 and 16,000 ranges. The 16,000 and 16,065 ranges will act as potential resistance factors within the occasion of a bounce.
Helps are available decrease at 15,700 and 15,610 ranges. Whereas upsides will keep capped so long as Nifty is under the 16,000 degree, any corrective transfer will make the buying and selling vary wider than normal.

The Relative Energy Index (RSI) is 66.17; it stays impartial and doesn’t present any divergence towards the value. The weekly MACD stays bearish under the Signal Line. A candle resembling a Hanging Man sample occurred on the charts. It’s a bearish indication, particularly when it emerges close to the excessive level.

The present candle isn’t a Classical Hanging Man because the decrease shadow isn’t as lengthy appropriately. Ideally, it ought to be at the very least thrice the scale of the actual physique. All in all, Nifty has a severe resistance to clear within the 15,900-16,000 zone.

So long as the index stays under this vary, it’ll stay weak to revenue taking at greater ranges. The longer-term charts confirmed the markets are overextended; it will hold all upsides capped and weak to promoting pressures from greater ranges.

Though aggressive shorts are usually not suggested but, longs ought to be be saved restricted to defensive and low-beta shares. Whereas trailing cease losses in a really strict manner, a selective and cautious strategy is suggested for the approaching week.

In our take a look at Relative Rotation Graphs®, we in contrast varied sectors towards CNX500 (Nifty500 Index), which represents over 95% of the free float market-cap of all of the listed shares

A overview of the Relative Rotation Graphs (RRG) exhibits that there isn’t any single sector within the main quadrant which can take the lead and within the coming days. Nifty PSU Bank Index, SmallCap, Media and Power Indices are contained in the main quadrant. However all appear to be paring their relative momentum towards the broader markets.

Nifty PSE Index has now rolled contained in the weakening quadrant. Nifty Midcap, Commodities and Steel indices are contained in the weakening quadrant. They’re more likely to comparatively underperform the broader Nifty500 Index.

Nifty Infrastructure index is contained in the lagging quadrant together with Nifty IT and Monetary Companies indices. Nonetheless, they look like consolidating and will give stock-specific relative outperformance towards the broader market. Financial institution Nifty has rolled contained in the bettering quadrant.

Aside from this, Nifty Auto, FMCG, Consumption and Realty Indices are contained in the bettering quadrant and these teams might present relative outperformance towards the broader market.

Essential Notice: RRG™ charts present the relative power and momentum for a bunch of shares. Within the above chart, they present relative efficiency towards Nifty500 Index (broader markets) and shouldn’t be used immediately as purchase or promote indicators.


(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder ofEquityResearch.asia and ChartWizard.ae and relies at Vadodara. He could be reached at milan.vaishnav@fairness)