January 23, 2021

market outlook: Dalal Avenue week forward: Market up for measured transfer; hold a watch on greenback



Marking the sixth consecutive week of positive aspects, Indian equities continued to bounce and prolonged the positive aspects this previous week. It was a measured transfer for the market, which went on to shut at a recent lifetime excessive as soon as once more.

The buying and selling vary over the previous 5 days was narrower than the week earlier than this one. The headline index oscillated in a variety of 338 factors, however noticed some volatility resurface. After a measured transfer and a few prolonged positive aspects, Nifty ended the week with a internet acquire of 255 factors, or 1.93 per cent, on a weekly foundation.

Trying on the shorter timeframe charts, Nifty appears extremely overstretched and overextended and is liable to some revenue taking at present degree.

On the weekly timeframe chart, the index doesn’t look overstretched, and this may occasionally result in some rangebound consolidation. The continuing rally continues to be fuelled by a weak US greenback, which has resulted in sturdy flows from FIIs. That requires conserving a detailed eye on the Greenback Index, because it appears extremely oversold and only a notch away from its sturdy multi-year assist.

Volatility resurfaced a bit because the India VIX climbed 4.23% to 18.79 on a weekly observe.

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The market might even see a measured transfer within the coming week, and has restricted upsides. Some consolidation can’t be dominated out. The 13,600 and 13,665 ranges could act as key resistance factors, whereas helps will are available in a lot decrease at 13,380 and 13,210 ranges. Any correction, if in any respect it occurs, will widen the buying and selling vary for the week.

The weekly RSI stood at 74.05. It has made a brand new 14-period excessive, and that is bullish sign. The RSI appears overbought, however stays impartial and doesn’t present any divergence in opposition to the worth. The weekly MACD stays bullish and is above the sign line.

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A white physique emerged on the candle. This suggests a directional consensus among the many market individuals and implies a longtime pattern until reversed.

Sample evaluation confirmed Nifty has gained rather more than what it had misplaced through the pandemic meltdown. Within the course of, the index has additionally crossed and moved previous the 2-year-long rising pattern line, which can now act as a powerful sample resistance. This has helped Nifty shift its assist ranges larger.

Going into the brand new week, traders ought to have sturdy desire for defensives appreciated FMCG, pharma, consumption and the PSUs which can be seeing sturdy sectoral rotation. If the Greenback Index pulls up a bit, which can result in rupee depreciation, it could play out tactically nicely for choose IT stocks. We reiterate approaching the market with utmost warning and avoiding extreme massive leveraged exposures, as Nifty stays liable to some corrective strikes.

In our take a look at Relative Rotation Graphs®, we in contrast numerous sectors in opposition to CNX500 (Nifty500 index), which represents over 95% of the free-float market-cap of all of the listed stocks.

A evaluate of the Relative Rotation Graphs (RRG) confirmed Nifty Financial institution, Providers Sector, Realty and Monetary Providers indices are positioned within the main quadrant. Nifty Metallic has rotated strongly again contained in the main quadrant. These teams are more likely to comparatively outperform the broader Nifty500 Index.

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Although Nifty Midcap100 Index is within the weakening quadrant, it’s wanting up, because it has improved its relative momentum over the earlier week. IT and Auto indices stay within the weakening quadrant.

Nifty Pharma and Media Indices languish within the weakening quadrant, although they’ve flattened themselves as they try to consolidate. Nonetheless, Nifty Infra, Vitality, FMCG and Consumption indices additionally within the lagging quadrant, and seem like enhancing sharply on their relative momentum and are seen transferring in the direction of the enhancing quadrant.

Nifty PSE Index has rolled over contained in the enhancing quadrant, signaling a probable finish to the relative underperformance. Nifty PSU Financial institution Index continues to advance contained in the enhancing quadrant, sustaining its sturdy north-easterly rotation.

Essential Observe: RRGTM charts present the relative energy and momentum for a gaggle of stocks. Within the above chart, they present relative efficiency in opposition to Nifty500 Index (broader market) and shouldn’t be used instantly as purchase or promote alerts.


(Milan Vaishnav, CMT, MSTA is a Advisor Technical Analyst and founding father of Gemstone Fairness Analysis & Advisory Providers, Vadodara. He will be reached at [email protected])