It was a truncated day for the markets; over the previous 4 buying and selling classes, the Indian equities continued to edge increased and ended on a recent lifetime excessive. The volatility too remained at elevated ranges. As talked about within the earlier technical be aware, the markets are build up forward of the Common Election outcomes on June 4th; this is without doubt one of the main exterior occasions that have an effect on the markets. Over the previous 4 classes, the Nifty maintained a buoyant trajectory; it oscillated in a 621.85-point vary. Volatility additionally continued spiking increased; India VIX surged by one other 9.66% to 21.71. Following a strongly trending week, the headline index closed with a internet weekly achieve of 491 factors (+2.19%).
Over the previous weeks, we have now seen the Nifty and the VIX rising concurrently. Previous cases have proven that such a phenomenon usually finally ends up performing as a precursor to any impending corrective transfer. We had into the expiry of the present month’s by-product collection; Nifty has constructed up recent OI at 23000 and 23500 ranges on the upside. On the decrease facet, 22500 has been seen constructing assist as per the choices knowledge. The derivatives knowledge present that the Nifty is gearing up for a risky transfer on both facet whereas it navigates the election end result.
The approaching week may even see a secure begin to the commerce; the degrees of 23200 and 23350 are prone to act as instant resistance ranges. The helps are available at 22700 and 23550 ranges.
The weekly RSI is 67.29; it exhibits a light bearish divergence towards the value. The weekly MACD is bearish and trades under its sign line. A powerful white-bodied candle exhibits a buoyant pattern that existed all through the week.
The sample evaluation of the weekly chart continues to point out Nifty staying in a small rising channel; nonetheless, the closest assist within the type of a 20-week MA exists means under at 22179. So the slightest of the corrective bout has bought important downsides from the present ranges. The 50-DMA is positioned at 22342. So on a broader be aware, the instant assist zone for the Index exists at 22150-22350 ranges. Whereas the markets might keep in a broad vary as long as they’re above this zone, any violation of this assist zone with inflict technical harm on the charts.
General, as we navigate the approaching month-to-month derivatives expiry week and the final election end result after that, it could be extraordinarily necessary to organize for the volatility that we’re set to witness within the markets. It might be prudent to curtail leveraged exposures. Contemporary shopping for ought to be saved restricted to defensive and low-beta shares; exposures in shares with both sturdy or enhancing relative energy could be an added benefit. Whereas implementing strict protecting stops and choosing hedges wherever potential, a really cautious strategy is suggested within the coming week.
Sector Evaluation for the approaching week
In our take a look at Relative Rotation Graphs®, we in contrast varied sectors towards CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all of the shares listed.
Relative Rotation Graphs (RRG) present that the Nifty Auto, Consumption, and Steel Index stays contained in the main quadrant. These teams are prone to proceed to comparatively outperform the broader markets.
Whereas staying contained in the weakening quadrant, each Realty and PSE indices are exhibiting enchancment of their relative momentum towards the broader markets together with the Commodities and Midcap 100 index. Moreover this, the PSU Financial institution, Pharma, Infrastructure, and Vitality index are additionally positioned contained in the weakening quadrant.
The Nifty IT Index continues to languish contained in the lagging quadrant of the RRG. It’s prone to comparatively underperform the broader Nifty 500 Index. The Media Index can also be positioned contained in the lagging quadrant. Nonetheless, it’s seen sharply enhancing its relative momentum and is on the verge of rolling contained in the enhancing quadrant. The Nifty Providers sector index has rolled again contained in the lagging quadrant.
The FMCG index stays firmly positioned contained in the enhancing quadrant. The Nifty Monetary Providers and the Nifty Financial institution Index are additionally positioned contained in the enhancing quadrant.
Necessary Observe: RRG™ charts present the relative energy and momentum of a bunch of shares. Within the above Chart, they present relative efficiency towards NIFTY500 Index (Broader Markets) and shouldn’t be used straight as purchase or promote alerts.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
www.EquityResearch.asia | www.ChartWizard.ae
Milan Vaishnav, CMT, MSTA is a capital market skilled with expertise spanning near twenty years. His space of experience consists of consulting in Portfolio/Funds Administration and Advisory Providers. Milan is the founding father of ChartWizard FZE (UAE) and Gemstone Fairness Analysis & Advisory Providers. As a Consulting Technical Analysis Analyst and together with his expertise within the Indian Capital Markets of over 15 years, he has been delivering premium India-focused Unbiased Technical Analysis to the Shoppers. He presently contributes each day to ET Markets and The Financial Occasions of India. He additionally authors one of many India’s most correct “Every day / Weekly Market Outlook” — A Every day / Weekly E-newsletter, presently in its 18th yr of publication.
