Over the past five sessions, the Nifty has largely consolidated with a bearish undertone. It traded within a defined range and concluded the week with a modest gain. Notably, the index remained below its crucial resistance levels. Market volatility also increased, with the India VIX rising by 8.68% to 15.90 over the week. The trading range narrowed, with Nifty fluctuating within a 363-point range, significantly less than the previous week. Despite a consolidating but bearish setup, the headline index closed with a weekly gain of 123.55 points (+0.51%).
This week included only four trading days, as Friday featured a symbolic Muhurat Trading session. In the prior week, the Nifty had breached and closed below the 100-DMA, which is currently at 24,669, as well as the 20-week MA at 24,744. This establishes the zone of 24,650-24,750 as a critical resistance area. If the Nifty remains below this zone, no significant and sustainable upward movement is expected in the markets, making it susceptible to ongoing selling pressure. The immediate support zone for Nifty now stands at 23,900, and the markets could weaken further if this level is breached.
Global markets are expected to provide a stronger handover, suggesting a stable start for the Indian markets on Monday. Resistance points are anticipated at 24,450 and 24,580, while support levels are identified at 24,120 and 23,900.
The weekly RSI is at 51.24, indicating a neutral position without divergence from the price. The weekly MACD remains bearish, trading above the signal line. Weekly chart pattern analysis shows strong downward momentum, with the 20-DMA exhibiting a steep decline, having crossed below the 50-DMA and nearing a cross below the 100-DMA. This indicates strong selling pressure and suggests that Nifty may remain in an intermediate downtrend. Consequently, resistance is likely in the 24,650-24,750 range during any technical rebounds. A cautious approach, with modest leveraged positions and guarded profits, is advised for the coming week.
An analysis of Relative Rotation Graphs® (RRG) compared various sectors against the NIFTY 500 Index, representing over 95% of market capitalization. The Nifty Pharma, Services Sector, IT, and Consumption Indices are in the leading quadrant of RRG, likely to outperform the broader markets, although some show slowing relative momentum. The Nifty FMCG and Midcap 100 Indices are in the weakening quadrant and may continue to underperform. The PSU Bank Index, Realty, Infrastructure, Media, PSE, Auto, Energy, and Commodities indices are in the lagging quadrant, with Energy, Auto, PSE, and Media likely to underperform further. Remaining sectors are improving in relative momentum and may enhance their performance against the broader market. The Nifty Bank, Metal, and Financial Services indices are in the improving quadrant and are expected to continue their positive relative performance.
It is noted that RRG charts illustrate the relative strength and momentum of stock groups compared to the broader markets and should not be directly used for buy or sell decisions. Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst based in Vadodara and founder of EquityResearch.asia and ChartWizard.ae. He can be contacted at milan.vaishnav@equityresearch.asia.
