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Market Recap: A Positive End to a Choppy Week
Nifty Updates : After weeks of volatility and losses, the stock markets finally saw some relief, closing the week on a positive note. The past week was shortened due to the August 15th trading holiday for Independence Day. Despite only four trading days, the markets remained within a defined range and managed to stay above the 50-day moving average (50-DMA).
Nifty’s Range-Bound Performance
Throughout the week, the Nifty index moved within a 464.20-point range, eventually closing near its weekly high. The volatility in the market decreased, with the India VIX falling by 6.08% to 14.40. Overall, the Nifty ended the week with a gain of 173.65 points, which translates to a 0.71% increase.
Key Levels and Resistance
The markets are still trading within a range, but they are now approaching the upper end of this range. According to derivatives data, significant Call Open Interest (OI) has accumulated between the 24,500 and 24,800 levels. If the Nifty moves higher, it will likely encounter resistance at the extended trendline pattern, which was previously support but has now turned into resistance.
On the downside, the 50-DMA is currently at 24,407, with the highest Put OI observed at the 24,000 strike. This suggests that the 24,000-24,100 zone is a crucial support area for the markets.
Outlook for the Coming Week
As we head into the new week, the markets are expected to open on a stable note. The Nifty is likely to face resistance at the 24,700 and 24,850 levels, while support can be found at 24,250 and 24,050.
The weekly RSI stands at 69.71, indicating a neutral stance with no divergence from the price. The weekly MACD remains bullish, but the narrowing histogram suggests a slowing momentum even as the index climbs higher.
Market Breadth and Sectoral Analysis
One key observation is the negative divergence in the cumulative Advance-Decline (AD) line of the broader Nifty 500 index. This indicates that fewer stocks are participating in the market’s upward movement, which could signal potential weakness.
Sectoral Insights from Relative Rotation Graphs® (RRG)
The Relative Rotation Graphs® (RRG) analysis shows that there have been no significant changes in the sectoral setup. The Nifty Midcap 100 index remains in the leading quadrant, but overall, a lack of sectoral leadership remains a concern.
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Weakening Sectors: The Nifty PSE, Realty, Consumption, and Auto indices are all in the weakening quadrant, though PSE and Consumption indices are showing signs of improving momentum.
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Lagging Sectors: The Nifty Bank Index has moved back into the lagging quadrant, indicating it may underperform the broader markets. Similarly, the Nifty Metal, Commodities, Energy, PSU Banks, and Infrastructure indices are also in the lagging quadrant, with some showing slight improvements in momentum.
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Improving Sectors: The Nifty Services Sector, Pharma, Media, Financial Services, and FMCG indices are inside the improving quadrant and are expected to continue strengthening their relative performance.
Final Thoughts: Stay Cautious
Overall, the markets may remain stable in the coming week, but there is still a risk of corrective retracements from higher levels. Investors should focus on stocks with strong and improving relative strength while keeping fresh purchases stock-specific. Leveraged positions should be managed carefully, and a cautious outlook is advised.
Disclaimer
The above analysis is based on Relative Rotation Graphs® (RRG), which show the relative strength and momentum of various sectors against the Nifty 500 Index. These charts are intended to provide insights into sectoral trends and should not be used as direct buy or sell signals.