Markets

D-Street week ahead: Nifty still vulnerable at higher levels, midcaps likely to outperform

NEW DELHI: The equity market recovered part of its previous week’s losses, as the follow-up to the technical pullback continued and the benchmark Nifty50 ended the week with a net gain of 143.85 points or 1.42 per cent on a weekly basis.

The gains in the week gone by came back on the technical pullback that the market witnessed in the last two days of the week.

In the coming week, we feel that the follow-through to the pullback that happened might extend into the next coming week as well. However, in the same breadth, the market will find resistance going ahead and might get pushed into some consolidation as well.

Eyes will also remain on Gujarat polls, which will have some sentimental effect as well. However, going purely on technical ground as well, market faces resistance once again at higher levels.

The coming week will see the levels of 10,350 and 10,490 playing out as immediate resistance levels. Market is not expected to easily move past its previous highs that it has marked. The supports come in lower at 10,130 and 9,980 zones.

The Relative Strength Index (RSI) on the weekly chart is 59.6274 and it remains neutral against the prices. The weekly MACD, is bearish as it trades below its signal line. No significant formations were seen on candles this week.

The pattern analysis makes it evident that the Nifty has taken support on the 100-DMA on the daily charts. However, this level also coincides with the 20-WMA on the weekly charts. Without any damage to the primary trend, there is still room for the market to consolidate.

The Weekly RSI has made a lower low and it still continues in that formation capping any meaningful breakout for the markets until this formation is breached on the upside.

The coming week is likely to remain volatile as well. We expect the market to face resistance and may face countering some profit taking bouts from higher level once again.

D-Street week ahead: Nifty still vulnerable at higher levels, midcaps likely to outperform

The market is likely to once again become vulnerable to weakness above 10,325-10,350 levels. Specific sectors are expected to stand out and picking the right stocks will be crucial as we go ahead in the coming trading week.

A study of Relative Rotation Graphs – RRG evidently show the coming week will see the broader market relatively out-perform the Nifty.

The stocks from Nifty Junior and midcaps are likely to see outperformance.

Good performance is also expected from PSU Bank index and energy stocks accompanied by media and infra. No major is expected from IT pack and it is likely to consolidate. Metals will continue to lose momentum on week-on-week basis. Pharma too may not see any meaningful gains on a weekly note. FMCG will continue to consolidate and may attempt to strengthen its base.

Important Note: RRG™ charts show you the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance as against NIFTY Index and should not be used directly as buy or sell signals.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)

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