In Charts: What Technicals Are Saying About Indian Markets

“The BSE Sensex closed higher by about 1% in this Diwali week. Global markets were also buoyant on news of successful trials of Moderna’s Covid-19 vaccine. With the end of earnings season, focus will shift back to economic recovery and market valuations. A risk to the markets is from a resurgence of covid infections in India,” said Sanjeev Zarbade, vice president, PCG Research at Kotak Securities.

The S&P BSE Sensex and the NSE Nifty 50 gained 0.6% each for the week ended Nov. 20. The broader market, however, managed to outperform the benchmarks, with the Nifty Midcap and Smallcap indices rallying 2.8% and 1.5%, respectively, during the period. Auto and PSU banks were among the top gainers, while IT and pharma stocks suffered losses.

“A candle resembling a small hanging man occurred on charts. This is not a classical hanging man as it has a small upper shadow which is ideally absent in hammers or hanging man patterns. However, occurrence of such candles near a strong pattern resistance area may potentially stall a rally as it has occurred following a downtrend,” said Milan Vaishnav, CMT, MSTA, technical analyst and founder of Gemstone Equity Research. “The coming week has the monthly derivatives expiry lined up. The levels of 12,960 and 13,135 will act as potential resistance points [for the Nifty 50]. Supports will come in at 12,750 and 12,530.”

The Relative Rotation Graph, used to gauge relative strength of equities against a common benchmark and each other, suggests Adani Transmission Ltd., Larsen & Toubro Ltd., Nestle India Ltd. and Shriram Transport Finance Co. Ltd. may relatively outperform the Nifty 500.

“Adani Transmission continues to advance steadily inside the leading quadrant. Nestle India, Shriram Transport Finance and L&T are also seen rotating northwest inside the improving quadrant while maintaining on their relative momentum,” Vaishnav said.

On the other hand, Abbott India Ltd., Adani Ports & Special Economic Zone Ltd., SBI Cards & Payment Services Ltd. and Zee Entertainment Enterprises Ltd. may relatively underperform the broader market.

“Zee has rotated inside the lagging quadrant and this puts a likely end to its outperformance. Abbott India, Adani Ports and SBI Cards have rotated back into the lagging quadrant as they continue to lose their relative momentum,” Vaishnav said.

Flavour Of The Month

The Nifty FMCG Index is on track to post its first monthly gain since July this year. The 15-member gauge has rallied close to 7% so far in November. That also sets the index on track for its best monthly gains since July 2018. Better-than-expected results in the quarter ended Sept. 30 and healthy festive season demand have aided FMCG stocks.

“The Nifty Fast Moving Consumer Goods Index continues to consolidate within the context of its structural uptrend. Prices are stuck within a two-year range near a flat 200-day moving average, signaling a lack of trend. Much like IT earlier in the year, we’re watching for a breakout to new all-time highs which would suggest that the sector is ready to experience broad-based strength,” Tom Bruni, CMT, technical analyst at All Star Charts, told BloombergQuint.

“On a relative basis, prices have crashed towards a potential support level as momentum diverges positively. While this doesn’t suggest a trend reversal is imminent, it does suggest we should look for prices to start to stabilise around this level, especially after such a sharp decline,” said Bruni. “In our view, the reward/risk has shifted in favour of the bulls at current levels than the bears.”