Week Ahead: NIFTY Remains Prone To Profit Taking; Low Levels Of VIX Warrants Caution At Current Levels

In per week that was shortened by Good Friday, the Indian equities prolonged their good points as they moved above essential resistance factors. The Nifty had a powerful and optimistic earlier week nevertheless it had halted its up transfer close to essential resistance ranges. Over the previous 4 classes, the index managed to maneuver previous these ranges whereas staying to stay within the intermediate falling channel that it’s buying and selling in. The buying and selling vary remained a bit narrower; the NIFTY moved in a 325.95 factors vary. Whereas staying largely bullish, the headline index ended with a web achieve of 239.40 factors on a weekly observe.

The approaching week stays shortened as effectively with Friday being a buying and selling vacation on account of Dr. Baba Saheb Ambedkar Jayanti. The earlier weekly closing had seen the NIFTY closing the 50-Week MA; this week, the index has moved above this level. The 50-Week MA at present stands at 17328. Apart from this, the Index has additionally moved above the falling pattern line that was posing resistance; nevertheless, the index stays throughout the intermediate falling channel that it has created for itself. Importantly, volatility has made a brand new low; INDIAVIX plunged by one other 8.79% to 11.80. That is very close to to the low examined in July 2021. That is one thing merchants will have to be very involved about and develop cautious of.

Monday is more likely to see a quiet begin and the approaching week will see the degrees of 17700 and 17865 appearing as resistance factors. The helps are available in at 17480 and 17350 ranges.

The weekly RSI is 50; it stays impartial and doesn’t present any divergence in opposition to the value. The weekly MACD is bearish and stays beneath its sign line.

The sample evaluation presents a blended image. The NIFTY has managed to maneuver comfortably above the 50-Week MA which is presently positioned at 17328. The Index has additionally moved and stayed above the falling pattern line that was posing resistance to the NIFTY over the earlier week. This pattern line begins from the excessive of 18600 and joins the following decrease tops whereas extending itself. Then again, the index remains to be throughout the intermediate falling channel that it has created for itself; it’s seen testing these ranges at present and is more likely to discover resistance barely above the present ranges.

As we method the upcoming shortened week, we might want to hold a really shut eye on volatility. The INDIAVIX is at certainly one of its lowest ranges once more; this not solely displays the complacency of the market contributors but additionally leaves merchants uncovered to violent profit-taking bouts from the upper ranges. Maybe we’re at a stage the place we have to cease chasing the up strikes and give attention to using any strikes on the upside to guard earnings on the lengthy positions. It’s endorsed to proceed retaining positions hedged and hold general exposures at modest ranges whereas adopting a cautious outlook over the approaching week.

Sector Evaluation for the approaching week

In our take a look at Relative Rotation Graphs®, we in contrast numerous sectors in opposition to CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all of the shares listed

The evaluation of Relative Rotation Graphs (RRG) exhibits that whereas NIFTY IT, Auto, FMCG, and PSE indices are contained in the main quadrant, they’re seen sharply giving up on their relative momentum. NIFTY Infrastructure and MidCap 100 indices are contained in the main quadrant; they appear firmly positioned and are anticipated to comparatively outperform the broader markets.

Whereas staying contained in the weakening quadrant, NIFTY Monetary Providers, Banknifty, and PSU Banks are seen enhancing on their relative momentum.

Pharma Index has rolled contained in the lagging quadrant. NIFTY Metallic and Commodities additionally stay contained in the lagging quadrant together with the Vitality and Media Group. Nonetheless, these indices look like barely enhancing their relative momentum. Nonetheless, they’ve a protracted strategy to go earlier than they begin comparatively outperforming the broader markets.

NIFTY Consumption and Realty Index stay within the enhancing quadrant of the RRG.

Necessary Be aware: RRG™ charts present the relative energy and momentum of a gaggle of shares. Within the above Chart, they present relative efficiency in opposition to NIFTY500 Index (Broader Markets) and shouldn’t be used immediately as purchase or promote indicators.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

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