Dalal Street Week Ahead: Uptrend Intact on Weekly Charts, Selective Profit-Taking Likely Ahead
Market Performance Overview
– Indian markets concluded last week on a robust note, with the Nifty index achieving a new lifetime peak, increasing by over 1%.
– The markets maintained a positive trajectory throughout the week, as Nifty steadily climbed while consolidating within a defined range.
– The index fluctuated within a 462-point band, reaching a low of 25,878 and a high of 26,340, before settling at a record high of 26,328.55. This resulted in a weekly gain of 286.25 points, or 1.10%.
Volatility & Technical Indicators
– Volatility metrics showed a slight increase, with the India VIX rising by 3.28% on a weekly basis to close at 9.45, remaining at historically low levels.
– The current technical setup for Nifty is firmly bullish, although the index is experiencing some congestion just below the upper Bollinger band.
– It continues to trade above all key moving averages, but momentum appears to be moderating as it approaches these lifetime highs, hinting at potential fatigue unless new catalysts arise.
Key Resistance and Support Levels
– Resistance Levels: 26,500 and 26,720
– Support Levels: 26,000 and 25,800
– A breach above 26,500 could push Nifty toward testing the upper end of the Bollinger Band around 26,712. Conversely, a drop below 25,800 might trigger selective profit-taking.
Momentum Indicators
– The weekly RSI stands at 64.19, indicating a neutral position with no divergence against the price. It has formed a 14-period high, which is considered bullish.
– The weekly MACD remains above its signal line, continuing to show a bullish crossover, although the histogram indicates flattened momentum.
Trading Strategy
– As we approach the new trading week, a cautious approach is recommended. While the overarching trend remains positive, selective profit-taking is likely, especially given the index’s proximity to the upper Bollinger band.
– Traders should focus on protecting gains and avoid aggressive new purchases at these levels. A stock-specific strategy concentrating on sectors exhibiting relative strength is advisable.
– Caution and disciplined risk management will be essential as we enter the first full trading week of 2026.
Sector Performance Insights
– The Relative Rotation Graphs (RRG) indicate ongoing sectoral performance against the CNX500 (NIFTY 500 Index).
– Leading Quadrant: PSU Bank, Infrastructure, Metal, IT, Nifty Bank, and Financial Services indices are expected to outperform the broader markets.
– Improving Quadrant: Nifty Auto and Metal indices are showing sharp improvements in momentum.
– Lagging Quadrant: Nifty Commodities, Consumption, FMCG, and Realty indices remain subdued and are likely to underperform the broader market.
– Although the Energy, Media, and PSE Sector indices are also in the lagging quadrant, they exhibit signs of enhancing relative momentum, while the Nifty Pharma Index shows improvement as well.
Conclusion
The outlook for Dalal Street remains bullish, though traders should stay vigilant and consider selective profit-taking strategies as the Nifty index hovers near record heights. By closely watching key resistance and support levels, market participants can better navigate the upcoming week and capitalize on potential opportunities while mitigating risks.
Stay updated with market trends and make informed decisions as we step into another exciting trading week.