Market Outlook: Next week to start on a stable note, very equity-specific moves are seen

The start of the week was a bit hectic. Nifty had a brief corrective consolidation to start the week. However, the last three sessions remained very strong.

The market had a wider trading range. It moved within a range of 737 points and ended the week on a very strong note. The last three sessions have had gap openings; the overall index closed with a solid weekly gain of 438.80 points (+2.62%).

The market also ended the month on a strong note. Nifty gained 1,378 points (8.73%) for July.



During the week, global equity markets digested the already discounted 75 basis point rate hike issued by the FOMC. Global stock markets surged and India was no exception. The foundations for a strong reversal were laid weeks ago when nearly all major global markets showed strong bullish divergence in leading indicators on the charts.

The Nifty stopped at the 50-week MA which is currently placed at 17,086. It is possible that the markets will consolidate at current levels; consolidation may occur in the form of distant oscillations, but the disadvantages may remain limited.

The options data also suggests that markets may have opened up a bit more room to the upside. However, for that to happen, keeping your head above 17,000 will be extremely crucial for the markets.

milanoAgencies

The coming week could see a stable start to the week. The 17,350 and 17,500 levels should act as potential resistance points. Supports are seen at the 17,000 and 16,620 levels.

The trading range for the week ahead should also remain wider than usual. The weekly RSI marked a new 14-period high, which is bullish; however, it remains neutral and shows no divergence from the price.

The weekly MACD showed a positive crossover. It is now bullish and trading above the signal line.

A strong white-body candle has appeared on the charts, which reflects the directional consensus of market participants.

Analysis of the weekly chart patterns suggests that Nifty has managed to mark a base for itself at the most recent lows. Now, unless it is breached, it becomes strong intermediate support for the markets.

On the upper side, Nifty is now trading above all three weekly moving averages. He opened a few advantages. However, to extend the rise, it would be crucial for the index to keep its head above the 50-week MA which is currently placed at 17,086.

Volatility remained largely unchanged. India VIX only lost 0.60% on a weekly basis.

Overall, in the week ahead, Nifty’s price action against the 17,000 levels will be crucial to watch.

The index may extend its upside move if it stays above 17,000. Any slip below will cause the markets to consolidate further. It is unlikely that we will see any particular sector dominating the landscape. We will likely see some very stock-specific moves over the coming week.

It is expected that while traditionally defensive pockets like IT and pharma will do well, some moves specific to metals, financials and autos stocks cannot be ruled out either.

It is recommended to continue to remain specific to each stock, avoid continuing extended bullish moves and protect profits at each higher level.

In our Relative Rotation Graphs® review, we compared various sectors to the CNX500 (Nifty 500 Index), which accounts for over 95% of the free float market capitalization of all listed stocks.

milan2Agencies
milan3Agencies

Analysis of the Relative Rotation Charts (RRG) shows no major changes in the pattern of the sector that was there over the previous week. The Bank Nifty Index, Consumers, FMCGs, Autos and Financials are in the lead. They should continue to relatively outperform the broader Nifty500 index.

The shrewd energy, PSE and infrastructure indexes continue to remain in the weakened quadrant. Some stock-specific isolated emissions may occur, but in relative terms they may continue to show deceleration.

The shrewd metals and commodities index appears to have begun its process to complete its move although it continues to languish inside the lagging quadrant.

The nifty Media and IT index should greatly improve its relative momentum against the broader markets.

The shrewd indexes of the pharmaceutical industry, the services sector and the PSU banks should improve their relative momentum markedly.

These groups are likely to put on a resilient show in relative terms

over the coming week.

Important note: RRGTM charts show the relative strength and momentum of a group of stocks. In the chart above, they show relative performance against the Nifty 500 Index (Broad Markets) and should not be used directly as buy or sell signals.

Leave a Comment

Your email address will not be published.