In our previous weekly note, we had said that the market will neither make any meaningful headway, nor will it see any major downside. Much on the expected lines, the market continued to consolidate at higher levels. The benchmark index Nifty50 ended the week, with a modest gain of 41.25 points, or 0.36 per cent.
Over the past two weeks, the Nifty50 has gained just little less than 1 per cent. The market has not seen any runaway rally, but has not lost much ground either.
In the coming week, we expect the market to trade on similar lines. The market has ended at a fresh high, and it may continue to post marginal highs going ahead, but it is still not expected to make any significant move and continue to remain vulnerable to bouts of profit taking at higher levels.
Nifty will see the 11,535 and 11,630 levels work out as immediate resistance in the coming week. Supports should come in lower at 11,380 and 11,200 levels. With markets sideways deliberation, supports have drifted lower, which increases the chances of volatility creeping in at some point.
The weekly RSI stands at 73.4555 and it has marked a fresh 14-period week, which is a bullish signal. It trades mildly overbought, but does not show any divergence from price. The weekly MACD continues to remain bullish even as it trades above the signal line.
A white body occurred on the candles. Apart from this, no major formation was observed.
Pattern analysis showed the market is firmly in its primary uptrend and continues to remain in the 30-month-old upward rising channel.
Overall, just like the previous week, Niftys primary uptrend remains intact. However, the markets remain mildly overbought on the charts and given the overall structure, Nifty remains vulnerable to profit taking at higher levels.
The market may keep posting fresh marginal highs, but it will be unwise to keep chasing the momentum; one has to remain vigilant at higher levels. Though dips may be used to make purchases, profits should be guarded at higher levels. A cautious view is advised for Monday.
In the study of Relative Rotation Graphs, we compare various sectoral indices against CNX500, which represents over 95 per cent the free float market-cap of all the listed stocks.
In the coming week, we will continue to see relative outperformance from the pharma, FMCG and energy stocks. These sectors are likely to see much better relative performance when benchmarked against the general market. We will also see continued improvement in the relative momentum in the midcap and smallcap universe. Broader market indices such as CNX100 and CNX200 are seen losing momentum.
Consistent loss of momentum was observed in financial services, consumption and services sector stocks on a weekly basis. Some sporadic and stock-specific outperformance may be seen from the metals and realty packs, but no major show is expected from these sectors along with the auto pack.
Important Note: RRGTM charts show you the relative strength and momentum for a group of stocks. In the above chart, they show relative performance as against the Nifty index and should not be used directly as buy or sell signals.