In Charts: What Technicals Are Saying About Indian Markets
Stock price information is displayed on a screen. (Photographer: Dario Pignatelli/Bloomberg)

In Charts: What Technicals Are Saying About Indian Markets

India’s equities posted gains in the week ended Sept. 11 as a rally in heavyweight Reliance Industries Ltd. masked the pessimism stemming from volatility in global markets and escalating border tensions with China.

The selloff in technology stocks led the fall in a couple of sessions through the week on expensive valuations, Joseph Thomas, head of research at Emkay Wealth Management, told BloombergQuint. Mixed economic data, geo-political uncertainty and the possibility of some profit-booking are factors that may shape the fortunes in coming days, he added.“The policy meets of various central banks and policy pronouncements in the context of a weak dollar may also lead to some realignment in the not-so-distant future.”

  • The Sensex and the Nifty 50 gained 1.3% and 1.1%, respectively, for the week.
  • The broader market, however, closed with marginal losses with the Nifty Midcap and Smallcap down 1% and 0.5%.
  • Barring information technology, all sectors underperformed the benchmark indices.
In Charts: What Technicals Are Saying About Indian Markets

After posting a bearish engulfing pattern in the previous week, the Nifty 50 traded in a narrow range this week. The overall sentiment remained muted in the market and the bullish move in select index movers such as Reliance led the Nifty index to surge higher,” said Nirali Shah, senior research analyst at Samco Securities. “The benchmark index is still trading in an overbought zone on a weekly timeframe and we maintain a bearish outlook going ahead expecting the index to retest the lower end of the channel drawn from March lows on the weekly chart. Immediate support and resistances are now placed at 11,180 and 11,590 respectively.”

In Charts: What Technicals Are Saying About Indian Markets

With the headline indices expected to trade within a narrow range, technical analysts remain focused on specific stocks and sectors going into the next week.

The Relative Rotation Graph, used to gauge relative strength of equities against a common benchmark and each other, suggests that TVS Motor Company Ltd., Ramco Cements Ltd., Natco Pharma Ltd. and Info Edge (India) Ltd. may relatively outperform the Nifty 500.

“Info Edge and Natco Pharma remain firmly placed in the leading quadrant, along with TVS Motor. Ramco Cements, currently in the improving quadrant, is also seen rotating higher and crossing into the leading quadrant,” Milan Vaishnav, CMT, MSTA, technical analyst and founder of Gemstone Equity Research, told BloombergQuint.

In Charts: What Technicals Are Saying About Indian Markets

On the other hand, Manappuram Finance Ltd., Godrej Industries Ltd., Mangalore Refinery & Petrochemicals Ltd. and Engineers India Ltd. may relatively underperform against the broader market.

“Godrej Industries and Manappuram Finance continue to lose their relative momentum and have rotated back into the weakening quadrant. MRPL and Engineers India continue to languish inside the lagging quadrant,” Vaishnav said.

In Charts: What Technicals Are Saying About Indian Markets

Dollar Bulls

On Sept. 1, the Indian rupee hit its strongest level against the dollar in six months at 72.73 as the prospect of lower U.S. interest rates and stronger domestic equities supported by continued foreign fund inflows put pressure on the greenback. But analysts expect the sharp appreciation over the last five months to end and the U.S. dollar to reverse its trend in the near term.

After strengthening from the levels of 77 per dollar, “price was seen taking support of its two-year-old long-term trendline last week. The formation of a Doji candlestick pattern right on the trendline, highlights a likely pause in the downtrend”, said Kunal Rambhia, founder and fund manager at The Streets.” Also, a bullish divergence on the weekly RSI further strengthens the case for U.S. dollar, according to Rambhia.

“It is seen that recent price actions have pushed the RSI near its support (oversold zone) of 35. In the past, prices showed decent reversal after RSI reaching this zone. But what is important to notice here is that while the prices are making higher lows, RSI is making lower lows. This seems to be forming a hidden bullish divergence.”

In Charts: What Technicals Are Saying About Indian Markets

The Indian rupee snapped its four-week gaining streak against the U.S. dollar to close 40 paise lower in the week ended Sept. 11.

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