While closing at its lifetime high point once again, the headline index ended with a net gain of 254 points, or 1.55 per cent, on a weekly basis. Given the kind of Put Open Interest (Put writing) addition seen at the 16,500 and 16,600 levels, it is evident that Nifty will not face any major downside pressure in the event of any corrective move. Going by the overall F&O data, the index is likely to make some more room on the upside. It would not be a surprise if Nifty tests the 16,800-16,890 zone in the coming days. To do this, it would be important for Nifty to keep its head above the 16,600 level.
Volatility reduced. INDIA VIX came off 4.35% to 13.40. Nifty may see a positive start to the new week and the 16,790 and 16,885 levels may act as immediate resistance points. Supports exist at the 16,600 and 16,480 levels. The weekly RSI stood at 72.69 level; it has marked a new 14-period high, which is a bullish indication. The RSI stays mildly overbought and remains neutral, but it is not showing any divergence against the price. The weekly MACD remains bullish and stands above the Signal Line. A candle with a slightly long lower shadow has emerged. The lower shadow is not long enough to make it predominantly bearish, but it warrants vigilant protection of profit at higher levels just in case if the market consolidates again within a defined range.
Pattern analysis showed after staging a breakout above the 15,900-15,950 levels, Nifty has extended its upward move with some rangebound consolidation in between. While there is still some room on the upside, the 16,350-16,400 zone will act as immediate short-term support for the index. Nifty September series futures have added over 10.20 lakh shares, or a massive 8.24% in net Open Interest, which came with the rise in the market, thus suggesting addition of fresh longs in the system. This exhibits a positive undercurrent.
Though Nifty has some more room left on the upside, we recommend staying highly stock-specific in approaching the market. Sectors like banks, which have been laggards over the past week, may relatively outperform the broader market along with select largecaps and some quality stocks from the broader universe. A positive outlook with vigilant protection of profits is advised for the coming week.
In our look at the Relative Rotation Graphs®, we compared various sectoral indices against CNX500 (Nifty500 Index), which represents over 95% of the free float market-cap of all the listed stocks.
An analysis of the Relative Rotation Graphs (RRG) showed Nifty IT and the Realty Indices are placed firmly inside the leading quadrant and are likely to relatively outperform the broader market. The Smallcap index is inside the leading quadrant; it may just show isolated moves as it appears to be paring its relative momentum. Nifty Commodities, Pharma, PSE, Metal, and MidCap100 Indices are inside the weakening quadrant. They may continue to relatively underperform the broader Nifty500 Index. NIFTY Auto and Energy indices continue to languish inside the lagging quadrant along with Media, Infrastructure and PSU Bank Indices. These groups may broadly underperform, but may show isolated stock-specific performance against the broader market. Nifty Services, Financial Services, FMCG and Consumption Indices are inside the improving quadrant. These groups are expected to show better and resilient performance of the coming days.
Important Note: RRG™ charts show relative strength and momentum for a group of stocks. In the above chart, they show relative performance against Nifty500 Index (broader markets) and should not be used directly as buy or sell signals.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
