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Nifty Holds Uptrend Amid Volatile Week but Faces Consolidation Near Highs
After a week filled with market fluctuations due to the budget and trade deals, the Nifty index managed to maintain its uptrend, although it now faces consolidation near recent highs. Market movements were marked by volatility, reacting initially to the Union Budget announced on Sunday, followed by a surge in response to the India–US trade agreement.
– The Nifty traded with increased volatility over a six-day trading week, ultimately closing higher.
– The index experienced oscillations within a broad intra-week range of 1,661.80 points.
– A significant event was the India VIX, which fell significantly by 12%, indicating reduced volatility following a busy week.
– On a weekly basis, the Nifty recorded a gain of 373 points.
Despite the positive weekly performance, the Nifty is now navigating a consolidation period after its earlier surge.
Current Market Dynamics
On the weekly chart, the Nifty comfortably holds above its medium-term moving averages. However, recent price action reveals hesitancy near the upper boundary of its rising channel, confronting a supply zone where selling pressure has frequently emerged.
– To reassert upward momentum, a sustained move above recent swing highs is essential.
– Conversely, a decisive break below the lower limit of the consolidation band could catalyze a deeper corrective phase.
Immediate Resistance and Support Levels
For the upcoming week:
– Resistance: Immediate resistance at 26,000, with a stronger hurdle near 26,300.
– Support: On the downside, expect support at 25,400, with a crucial area near 24,850 coinciding with key moving average support.
Momentum Indicators
– The weekly RSI is near 53, positioned in the neutral zone and not signaling any bullish or bearish divergences against price.
– The weekly MACD remains below its signal line, though the histogram indicates a narrowing gap, suggesting a reduction in downside momentum.
The weekly candlestick chart represents a long-range candle, evidencing market volatility and indecision at elevated levels rather than outright bullish strength. Importantly, the Nifty continues to trade above its 50-week and 100-week moving averages, sustaining the long-term bullish trend, while short-term consolidation is anticipated.
Trading Strategy and Market Focus
Given the current setup, traders should embrace a balanced and selective approach in the week ahead:
– Avoid aggressive long positions until the index demonstrates a clear breakout above established resistance.
– Manage existing positions with disciplined trailing stops to safeguard gains.
New opportunities are expected to emerge on a stock-specific basis rather than driven by the index overall.
Sector Performance Insights
An analysis of the Relative Rotation Graphs® reveals that various sectors are performing distinctly against the CNX500 (NIFTY 500 Index):
– Leading quadrant: Nifty Financial Services, IT, Banknifty, Services Sector, Metal, and PSU Bank Indices are currently outpacing the broader market, despite some relative momentum loss in PSU Banks.
– Weakening quadrant: The Nifty Midcap 100 Index is entering a weakening phase, signalling a potential slowdown in its relative performance.
– Lagging quadrant: The Nifty Realty and FMCG Indices are currently underperforming, although Realty is showing slight improvements in momentum.
– Improving quadrant: The Energy and Media Indices have recently rolled into an improving phase.
Important Considerations
The RRG charts reflect the relative strength and momentum of stock groups compared to the NIFTY500 and should not be used as direct buy or sell signals.
In conclusion, as the Nifty navigates this consolidation phase, maintaining strategic discipline and focusing on weekend support and resistance zones will be crucial. Keep a close eye on sectoral movements and embrace opportunities that arise from selective participation.