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The Indian equity market witnessed consolidation for the second week in a row.
The market had a generally stable week, remained in a limited and defined range, and ended mildly in the negative.
In the previous weekly note, we had anticipated the consolidation to continue.
The market had a subdued start to the New Year and predominantly witnessed low volumes amid the holiday season.
On a weekly basis, the headline Nifty50 ended with a nominal loss of 19.15 points, or 0.16 per cent.
In the coming week, the market will see reactions to the geopolitical conflict in West Asia, which has already sent safer asset classes like gold soar to its recent highs and the crude flare up.
From a technical point of view, the Indian equity market will continue to face stiff overhead resistance near the 12,300 level.
F-O data pointed towards the market keeping its upsides limited.
On the expected lines, the volatility resurfaced and INDIA VIX rose 20.62 per cent to 12.69.
The market is likely to see a volatile start to the week.
The 12,300 and 12,390 levels will act as stiff overhead resistance in the event of any incremental up-moves.
However, supports are expected to come much lower at 12,130 and 11,960 levels.
The market is showing signs of continued consolidation, but any move on the downside will not only increase volatility, but also make the trading range wider than usual.
The Relative Strength Index (RSI) on the daily chart stands at 64.88; it remains neutral and does not show any divergence from the price.
The weekly MACD remains bullish, and trades above the signal line.
A black body emerged on the candles.
No other formations were observed on the charts.
Pattern analysis of the weekly charts showed Nifty now remains in the secondary trade, which has been mostly in a broad range.
The index has attempted a breakout by resolving the bearish divergence on the RSI, but has also shown loss of momentum at higher levels.
However, the attempted breakout shall remain in force as long as Nifty keeps its head above the 12,100 level on a closing basis.
Since the week that has gone by saw consolidation, so the analysis for the coming week would be more or less on the same lines as the previous week.
Nifty price action against the 12,300-12,350 zone will be crucial.
Unless these levels are taken out, there are little possibility of any meaningful up-move over the coming days.
We continue to recommend avoiding any excessive purchases, and avoiding positions with large leverage.
One should continue to protect profits at higher levels and have a generally cautious view for the week ahead.
In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (Nifty500 Index), which represents over 95% of the free float market-cap of all the listed stocks.
A review of the Relative Rotation Graphs (RRG) showed there was no significant change in the placement of the sectors compared with the previous week.
The Services sector is on the verge of breaking into the leading quadrant.
The realty group also has advanced in the leading quadrant.
Bank Nifty and Financial services index, which are also placed in the leading quadrant along with the Realty index, are likely to collectively outperform the broader market on a relative basis.
Media and Metal indices are building on their relative momentum, while staying in the improving quadrant.
Some stock-specific shows can be expected from these groups.
Other vital indices like the FMCG, Consumption, Infrastructure, Energy and CPSE indices are seen drifting lower and now placed in the lagging quadrant.
They are likely to continue to underperform the broader markets when benchmarked against the broader Nifty500 index.
Important Note: RRGTM charts show the relative strength and momentum for a group of stocks.
In the above chart, they show relative performance against Nifty500 Index (broader market) and should not be used directly as buy or sell signals.
(Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst and founder of Gemstone Equity Research - Advisory Services, Vadodara.
He can be reached at This email address is being protected from spambots.
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Dalal Street week ahead: Services, realty, financial services stocks favourably poised
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