In Charts: What Technicals Are Saying About Indian Markets

“In the beginning, news of Joe Biden winning the U.S. presidential elections and development of a Covid-19 vaccine with high efficiency raised hopes of a faster-than-expected recovery. As the week progressed, additional stimulus package announced by the finance minister boosted the sentiment,” said Ajit Mishra, vice president (research) at Religare Broking Ltd. The positive macroeconomic data released during the week, too, added to the optimism, he said.

The Sensex and the Nifty 50 had gained 3.7% each for the week ended Nov. 13. The broader market, though advanced, continued to underperform the benchmarks. The mid- and small-cap indices rose 3.1% each. Metals, realty and banking stocks were among the top gainers, while the Nifty IT was the only sectoral loser.

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“The market is consolidating and slowly inching higher towards 12,900-13,000 levels. The Nifty 50 is forming a symmetrical triangle on the intra-day chart. It’s a bullish continuation formation that would lift the market towards the psychological mark of 13,000,” said Shrikant Chouhan, executive vice president, equity technical research at Kotak Securities. “The breadth of the broader market is quite satisfactory, indicating a firm grip of bulls, and will not allow the Nifty to fall below 12,600 levels in the normal circumstances.”

The Relative Rotation Graph, used to gauge relative strength of equities against a common benchmark and each other, suggests Ambuja Cements Ltd., Cadila Healthcare Ltd., Hindustan Unilever Ltd. and P&G Hygiene & Health Care Ltd. may relatively outperform the Nifty 500 Index.

“Ambuja Cemnets has advanced further in the leading quadrant, while Cadila has rolled over inside the improving quadrant and is seen heading towards the leading quadrant. P&G and HUL are seen steadily making a north-easterly rotation inside the improving quadrant while maintaining their relative momentum,” said Milan Vaishnav, CMT, MSTA, technical analyst and founder of Gemstone Equity Research.

On the other hand, Bharti Infratel Ltd., Punjab National Bank, United Breweries Ltd. and UPL Ltd. may relatively underperform the broader market.

“While UPL has rolled over inside the lagging quadrant, UBL has taken a u-turn back inside the lagging quadrant. Infratel and PNB continue to languish inside the lagging quadrant,” Vaishnav said.

Silver Dazzle

Precious metals have been one of the best-performing asset classes in 2020 as the uncertainties stemming from the coronavirus outbreak prompted investors to rush towards safe havens. Silver is one of the biggest outperformers.

While the buzz around Pfizer Inc.’s vaccine for the coronavirus led to the biggest slump in silver prices in nearly three months on Monday, they soon rebounded and had ended higher in each of the last four trading sessions. So far this year, silver prices have risen more than 38% compared to gold’s 25%.

The recent correction therefore can be used as an opportunity to buy, according to Kunal Rambhia, founder and fund manager at The Streets. “After the recent uptick, it retraced back to the yearly support zone. The recent price action showed falling wedge breakout (highlighted in yellow). An inverse head and shoulder formation, along with massive symmetrical triangle (highlighted in white), is underway. Price is also taking constant support of 100 SMA (simple moving average),” said Rambhia. “To sum up, it’s showing a likely trend continuation. 59,000-61,000 seems a good demand zone and one can accumulate near that zone.”