Nifty: Trade Setup: Nifty to stay in a range now; select sectors may outperform

Consolidation continued in the Indian equity market on Thursday, though it looked a bit weaker than the usual days of consolidation. Nifty saw a quiet start to the day and stayed in a very narrow range until afternoon, when it traded positive with modest gains.

However, the second half of the session saw the index turn weak, pare the modest gains and slip into the red. From there on, Nifty stayed in the declining trajectory and finally ended with a net loss of 93.15 points (-0.53 per cent).

Thursday’s session saw the month close with a gain of 485 points (2.84 per cent), and the quarter end with a gain of 1,896 points (+12.06 per cent). This quarter included, Nifty has ended with gains for six quarters in a row.

The monthly F&O expiry went off quietly. The technical setup showed Nifty may continue to stay in a defined and broad consolidation range, even as the sectoral outperformance continues. Volatility eased a bit as India VIX declined 2.31 per cent to 18.4025.

Friday’s session is likely to see a quiet start and the 17,680 and 17,750 levels are likely to act as key resistance points. Support may come in at 17,560 and 17,500 levels.

The Relative Strength Index (RSI) on the daily chart stood at 63.14; it has made a fresh 14-period low, which is a bearish signal. The RSI also showed a mild negative divergence against the price. The daily MACD remained bearish and did not show any divergence against the price.

Pattern analysis on the daily chart showed the 17,900-17,950 zone has become an intermediate top for Nifty. Given the most recent price action, the index has dragged its resistance points lower to the 17,800 level.

All in all, the technical setup suggests Nifty has now immediate resistance at the 17,800 level. This translates into the formation of a broad consolidation range in the 17,500-17,950 zone. Nifty’s current behaviour may continue for some more time; it is very likely that it will continue to consolidate while some sectoral indices like Auto, PSE, PSU Banks, etc., improve their relative performance against the 50-pack. Traders and investors should remain highly stock specific and stay light on overall exposures.


(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)