Week Ahead: NIFTY Opens Up Some More Room On The Upside; Sustaining Above This Level Crucial | Analyzing India

In the previous weekly note, it was mentioned that the markets have formed a strong base for themselves; the most logical move that the markets can make is to move towards their 50-Week MA which was then placed at 17073. The beginning of the previous week was a bit jittery; the NIFTY had a brief corrective consolidation to start the week with; however, the last three sessions remained very strong. The markets had a litter bigger trading range; it moved in a 737-point range and closed the week on a very strong note. The last three sessions had gap-up openings; the headline index closed with a strong weekly gain of 438.80 points (+2.62%). The markets also closed the month on a robust note; NIFTY gained 1378 points (+8.73%) for July.

During the week, the global equity markets digested the already-discounted 75 bps rate hike that came from FOMC. The equity markets surged; India was no exception. The foundations for a strong reversal were set weeks ago when nearly all the key global markets had shown a strong bullish divergence of the lead indicators on the charts. The NIFTY has halted at the 50-Week MA which is presently placed at 17086. There are possibilities that the markets may consolidate at current levels; the consolidation may happen in form of ranged oscillations but the downsides may stay limited. The options data also suggest that the markets may have opened up some more room for upside; however for this to happen, keeping the head above 17000 will be extremely crucial for the markets.

The coming week may see a stable start to the week; the levels of 17350 and 17500 are expected to act as potential resistance points. The supports come in at 17000 and 16620 levels. The trading range for the coming week is also likely to stay wider than usual.

The weekly RSI has marked a fresh 14-period high which is bullish; however, it stays neutral and does not show any divergence against the price. The weekly MACD has shown a positive crossover; it is now bullish and trades above the signal line.

A strong white-bodied candle appeared on the charts, this reflected the directional consensus of the market participants.

The pattern analysis of the weekly chart suggests that NIFTY has successfully marked a base for itself at the most recent lows; now unless violated, that becomes a strong intermediate support for the markets. On the higher side, NIFTY now trades above all the three Weekly Moving Averages; it has opened up some upsides. However, to extend the up move, it would be crucial for the Index to keep its head above the 50-Week MA which is presently placed at 17086.

The volatility remained largely unchanged; INDIAVIX lost just 0.60% on a weekly basis. Overall, in the coming week, NIFTY’s price action vis-à-vis the levels of 17000 will be crucial to watch. The index may extend its up move if it stays above 17000; any slip below this will make the markets undergo some consolidation once again. We are not likely to see any particular sector dominating the landscape; we are likely to see some highly stock-specific moves over the coming week. It is expected that while traditionally defensive pockets like IT and Pharma may do well, some stock-specific moves from the Metals, Financials, and Autos cannot be ruled out as well. It is recommended to continue staying stock-specific; avoid chasing the extended up moves and protect profits at each higher level.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Milan Vaishnav

About the author:
Milan Vaishnav, CMT, MSTA is a qualified Independent Technical Research Analyst at his Research Firm, Gemstone Equity Research & Advisory Services in Vadodara, India. As a Consulting Technical Research Analyst and with his experience in the Indian Capital Markets of over 15 years, he has been delivering premium India-focused Independent Technical Research to the Clients. He presently contributes on a daily basis to ET Markets and The Economic Times of India. He also authors one of the India’s most accurate “Daily / Weekly Market Outlook” — A Daily / Weekly Newsletter,  currently in its 15th year of publication.

Milan’s primary responsibilities include consulting in Portfolio/Funds Management and Advisory Services. His work also involves advising these Clients with dynamic Investment and Trading Strategies across multiple asset-classes while keeping their activities aligned with the given mandate.
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