Dalal Road week forward: Nifty50 is now over-extended, could slip into consolidation

Though home shares logged positive factors on a weekly foundation, they confirmed the primary indicators of an impending broad consolidation, because the market spent a lot of the previous three days correcting from larger ranges. The market was buoyant firstly of the week. However after marking the weekly excessive at 14,653, Nifty continued to witness bouts of revenue reserving at larger ranges subsequently. The buying and selling vary didn’t broaden a lot on both facet, however volatility surges. Regardless of 5 days of risky buying and selling, the headline Nifty index closed with a web acquire of 86.45 factors, or 0.60 per cent, on a weekly foundation.

There isn’t a disputing the truth that the market has demonstrated very sturdy undercurrents. The US greenback will proceed to remain weak following a big stimulus from new US authorities. All this may proceed to gas liquidity within the rising markets on the whole. The buoyancy available in the market will be gauged from the 10 constructive weekly closes within the final 11 weeks. That mentioned, the overbought and overextended construction of the charts could push the market into extra consolidation.

Contemporary bounces shall come provided that Nifty manages to maneuver previous the 14,650 mark. Volatility surged as India VIX moved up 16.33 per cent to 24.01 stage.

The market could consolidate in a broad vary for some extra time. The 14,500 and 14,675 ranges will act as resistance factors, whereas helps will are available in at 14,285 and 14,100 ranges. The buying and selling vary is more likely to get a bit wider than that within the earlier week. Volatility can also be more likely to rise some extra.


The weekly RSI stood at 79.88. It remained within the overbought territory above the 70 mark. The weekly MACD stays bullish above the sign line. A Taking pictures Star emerged on the candles. This can be a classical Taking pictures Star sample because the index opened the week larger than the earlier one, and moved even larger, however corrected to finish within the decrease half of the candle, leaving an extended higher shadow on the upside. The index marked the intermediate high on the 14,653 stage for the close to time period.

Sample evaluation revealed Nifty has prolonged itself a lot larger following a breakout from the 12,800-12,850 zone. This has raised the assist a lot larger to 13,000 stage, given the rising nature of the development line that Nifty took out whereas reaching the breakout.

General, Nifty has overextended itself and has largely deviated from the imply. Even the closest 20-week shifting common is now at 12,595. The Bollinger Bands have gotten a lot wider than regular and the potential of Nifty returning to its regular vary can’t be dominated out.

All in all, there’s a excessive likelihood that the market could slip into consolidation within the coming weeks. Within the occasion of any extension of the bounce, we strongly suggest sticking to solely high-quality, high-liquidity shares, which have been seeing improved relative energy towards the broader market, and people which haven’t run up an excessive amount of over the previous weeks. This can assist maintain the risk-reward profile much less skewed.

Whereas persevering with to remain extremely stock-specific, vigilant safety of income is suggested at present ranges.

In our take a look at the Relative Rotation Graphs®, we in contrast numerous sectoral indices towards CNX500 (Nifty500 Index), which represents over 95 per cent of the free-float market-cap of all of the listed shares.


The overview confirmed regardless of staying within the main quadrant, Nifty Financial institution, Nifty Providers Sector and Nifty Monetary Providers Indices are seeing near-vertical paring of relative momentum on the charts. Other than this, Nifty Realty, Nifty Commodities, Nifty MidCap100 and Nifty Steel Indices are firmly positioned within the main quadrant. Additionally, Nifty PSU Bank Index has entered the main quadrant.

The one sector current within the weakening quadrant is IT. Nevertheless, even that is exhibiting an enchancment in relative momentum. Nifty Media and Auto Indices are within the lagging quadrant. Nevertheless, additionally they seem like sharply bettering on their relative momentum. Nifty Pharma Index can also be positioned within the lagging quadrant, however it appears as whether it is taking some breather and is within the technique of finishing its consolidation interval.

Nifty Vitality Index has entered the bettering quadrant following the JdK RS-Momentum, rising above 100. This marks a possible finish to the relative underperformance of this group.

Nifty FMCG, Consumption, Infrastructure and PSE Indices are positioned within the bettering quadrant and seem like rotating favorably by sustaining the northeasterly trajectory of the rotation.

Necessary Word: The RRGTM charts present the relative energy and momentum for a bunch of shares. Within the above Chart, they present relative efficiency towards Nifty500 Index (broader market) and shouldn’t be used immediately as purchase or promote indicators.

(Milan Vaishnav, CMT, MSTA is a Advisor Technical Analyst and founding father of Gemstone Fairness Analysis & Advisory Providers, Vadodara. He will be reached at milan.vaishnav@equityresearch.asia)

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