Business & Investment

Market Outlook: One Week Ahead Daral Street: Don’t Try To Rally Before Budget, Stay Defensive

Last week’s weekly note stated that the market was showing the first signs of fatigue. Nifty Marked the highest at 14,653. This was at this point when a profit-taking seizure appeared. During the past week, the market hit some gradual highs, but couldn’t sustain above the previous week’s highs. This makes the 14,653 level a potential mid-top.

Also, as expected, trading coverage remained broader as markets witnessed collective movements. Nifty oscillated in the range of 531 points and ended up with a very small loss of 61.80 points (-0.43%) on a weekly basis.

Regardless of the underlying buoyancy or liquidity-driven bounce, the market is well off average. This was evident from the fact that even the 20-week moving average is now 12,747. It is about 1,624 odd points below the current level. As a result, the Bollinger Bands are wider than normal, indicating that the rise from current levels is likely to be limited. Nifty is likely to continue its corrective action in a wide range and in smaller quantities.

As we get closer Union budget, Volatility may increase in the coming days.

However, last week, volatility subsided a bit in India. VIX On a weekly basis, it goes from about 6.61% to 22.42. Nifty could face resistance at 14,450 and 14,530 levels next week, but support will come at 14,250 and 14,000 levels. The trading range is expected to remain wider next week.

Weekly RSI It is located at 78.38. It remains neutral and shows no difference in price. However, the RSI is in the overbought territory. The daily MACD is bullish as it stays above the signal line. The frame occurred for 2 consecutive weeks. It is made up of small entities. This is also a long upper shadowed candle, indicating a potential stall of the current rise.

Pattern analysis suggests that Nifty broke past the uptrend line resistance following a breakout from the 13,000 mark. Perhaps it marks the potential top at 14,653. In the next medium term, the 14,650-14,750 zone will be a powerful resistance area for 50 packs.

It’s time to avoid chasing high-beta stocks and stocks that have risen excessively in the past few weeks, whether the coalition budget approach or liquidity is spurring the rally. All rises from this point, if incurred, should be used to make a profit and remove some money from the table.

Speculative accumulation prior to the coalition budget makes it wise to maintain traditionally defensive IT, pharmaceuticals, FMCG, and consumer goods, even if short-term momentum is seen in the coming days. I repeat that strongly. In a sense, new purchases from this point are very stock-specific and exposure should be maintained at a reasonable level.

Looking at the Relative Rotation Graph ®, we compared various sectoral indexes with the CNX500 (Nifty500 Index). CNX500 accounts for more than 95% of the market capitalization of all listed stocks.

A review of the Relative Rotation Graph (RRG) shows Nifty Financial Services. Product, Banking, Services Sector, and Metals Index, despite being in major quadrants, make a significant comparison of relative momentum. It is possible that these groups will gradually stop outperforming a wide range of markets.

The Nifty PSU Bank and Realty indexes, along with the Nifty MidCap100 index, are still firmly positioned in the major quadrants. These groups can relatively outperform the broader Nifty500 index. Nifty Auto, I have just entered the main quadrant.

The IT index is the only one in the weakening quadrant. It is also seen to be improving rapidly with relative momentum to the wider market. The Nifty Pharma Index appears to be improving its relative momentum, but remains sluggish within the lagging quadrant. The Nifty Media Index is just entering the quadrant of improvement, indicating that its relative performance degradation is about to end.

Nifty PSE, Infrastructure, FMCG, infrastructure Energy groups are also placed within the improvement quadrant. These groups have the potential to host resilient shows from here onwards.

Important Note: The RRGTM chart shows the relative strength and momentum of the stock group. The chart above shows the performance relative to the Nifty500 index (wider market) and should not be used directly as a buy / sell signal.

(Milan Vaishnav, CMT, MSTA are consultant technical analysts and founders of Gemstone Equity Research & Advisory Services in Vadodara.

Market Outlook: One Week Ahead Daral Street: Don’t Try To Rally Before Budget, Stay Defensive Market Outlook: One Week Ahead Daral Street: Don’t Try To Rally Before Budget, Stay Defensive

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