In a 6-day trading week, the Nifty traded with increased volatility throughout the week and ended with gains. The week saw sharp swings as markets first reacted nervously to the Union Budget announced on Sunday, followed by a strong positive response to the Indo-US deal that led to an upward gap.
As a result, the index oscillated in a wide intra-week range of 1,661.80 points before stabilizing higher. India’s VIX cooled significantly during the week, down around 12%, reflecting an easing of volatility after the event-packed phase.
On a weekly basis, the Nifty posted a gain of 373 points. Structurally, the general market trend remains positive, even if the index is currently going through a consolidation phase after a strong rise.
ETMarkets.comOn the weekly chart, Nifty continues to hold above its major medium-term moving averages, but recent price action shows hesitation near the upper end of the ascending channel. The index faces a supply zone around recent highs, where selling pressure has appeared on several occasions.
Even though the main trend is still up, a sustained move above the recent high would be necessary to reaffirm the bullish momentum, while a decisive break below the lower end of the recent consolidation band could trigger a deeper corrective move. For the coming week, the markets could get off to a positive start after a volatile but eventful week.
Immediate resistance for the Nifty lies around 26,000, followed by a stronger hurdle near 26,300. On the downside, supports are seen at 25,400, with the next important support placed near 24,850, which also coincides with the key moving average support.
Momentum indicators present a neutral to slightly positive picture. The weekly RSI sits near 53, remaining in the neutral zone and indicating no bullish or bearish divergence from the price.
The weekly MACD remains below its signal line, but the histogram has started to narrow, suggesting a loss of bearish momentum. On the candlestick front, the week culminated in a relatively long-term candle, highlighting volatility and indecision near higher levels rather than outright strength.
From a trend perspective, the weekly chart shows Nifty closing above the downtrend line support. The recent pullback from the highs does not damage the broader trend, as the index continues to trade comfortably above its 50- and 100-week moving averages. This pattern suggests that the long-term trend is intact, but short-term consolidation cannot be ruled out.
Given the current setup, traders and investors should take a balanced and selective approach in the coming week. Aggressive long positions can be avoided until the index shows a clear break above resistance, while existing positions should be managed with disciplined trailing stops to protect gains. New opportunities will likely remain stock-specific rather than index-specific.
Overall, the focus for the coming week should be on prudent risk management, selective participation and close monitoring of index behavior around identified support and resistance zones.
In our Relative Rotation Graphs® review, we compared various sectors to the CNX500 (NIFTY 500 index), representing over 95% of the free float market capitalization of all listed stocks.
ETMarkets.comRelative Rotation Charts (RRG) show that Nifty Financial Services, IT, Banknifty, Services Sector, Metal and PSU Bank indices are in the top quadrant of the RRG. Even if PSU banks lose some relative momentum, these groups will continue to relatively outperform the markets as a whole.
ETMarkets.comThe Nifty Midcap 100 index has entered the weakening quadrant. This could lead to a slowdown in the relative performance of the Midcap Index. Along with this, the Nifty Auto and Infrastructure indices are also in the weakening quadrant.
The Nifty Realty and FMCG indices are languishing in the lagging quadrant, with the Realty index showing slight improvement in its relative momentum. The energy index was in the improving quadrant. Additionally, the media index is also in the improving quadrant.
Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the chart above, they show relative performance against the NIFTY500 Index (broader markets) and should not be used directly as buy or sell signals.
(The author Milan Vaishnav is CMT, MSTA Consulting Technical Analyst)
(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)