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    Dalal Street week ahead: Nifty to seek a base, as F&O rollovers pick up pace

    Synopsis

    The equity benchmark ended the week 168.95 points, or 1.61 per cent, down.

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    Overall, even though the Nifty remains in a continuing downtrend, few of its lead indicators on the charts remain nearly oversold.

    The week gone by saw a lot of volatility and remained fruitless for the market. What had been gained in the week before was all lost during this week. In our previous weekly note, we had mentioned that the market had enough room to pull itself back to around 10,700 mark.

    This week saw Nifty test the 10,700 level, but it was precisely from this mark that the index saw a sharp bout of correction. The equity benchmark ended the week 168.95 points, or 1.61 per cent, down on a weekly basis though it still marked a higher top and higher bottom on the weekly charts.
    m1Agencies

    As we approach a new week, we expect the market to remain volatile as F&O rollovers dominate the proceedings. Even though the market remains in a continuing downtrend, it has shown some signs of a likely technical pullback. We expect a stable start to the week and the market may attempt to pull back once again and try to re-validate the present zone as its base for the immediate short term.

    The 10,430 and 10,590 levels are likely to act as immediate resistance for the Nifty50, while support are likely to come in at 10,250 and 10,140 levels.

    The weekly RSI, which is at 36.4130, shows bullish divergence against the price. The weekly MACD remains bearish as it trades below its signal line. No significant formations were observed on the candles.

    Pattern analysis showed the Nifty, which has marked its lifetime high at 10,651, has run up much ahead of its curve. In a sharp reversion to the mean that was seen, it suffered a equally sharp corrective downside and slipped below its 50-week moving average. The previous week’s high was at 10,710, as Nifty faced resistance to the 50-week moving average that stands at 10,709.

    Overall, even though the Nifty remains in a continuing downtrend, few of its lead indicators on the charts remain nearly oversold. This means in the event of any further weakness in the market, it is not likely to breach the 10,180-10,200 levels in the worst case scenario.

    On the other side, we will continue to see the 50-week MA act as resistance in the event of a pullback. Broadly speaking, we are likely to see a volatile week ahead with Nifty oscillating in a broad range struggling to form and confirm a base for the immediate short term.

    Sector rotation is evident in the market and with every dip, we see more defensive purchases in sectors like metals, infrastructure and pharma. We recommend investors to remain light on overall exposures and avoid aggressive short positions as long as Nifty defends the base of 10,180-10,200.
    m2Agencies

    m3Agencies

    m4Agencies

    In a study of Relative Rotation Graphs, we compared various sectors against CNX500, which represents over 95% of free float market cap of all the listed stocks.

    While inspecting Relative Rotation Graphs (RRGs), the energy pack is distinctly losing momentum though it continues to remain in the leading quadrant. The pharma pack along with IT continues to be firmly in the leading quadrant with improving momentum. In the coming week, we expect to see distinct relative outperformance from these sectors. Metal, Infrastructure and Media stocks should also continue to improve their momentum and subsequently their relative outperformance. The PSU pack, too, is expected to perform well. Bank Nifty is likely to consolidate along with services sector stocks. No eye-catching performance, except for select stocks, is expected from FMCG and Midcaps and PSU Banks segments. Auto and Realty are likely to lag.


    Important Note:
    In the above chart, they show relative performance as against Nifty Index and should not be used directly as buy or sell signals.




    (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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