In Charts: What Technicals Are Saying About Indian Markets

Indian equity markets posted gains in the week ended Sept. 19, masking declines amid border tensions with China and no measures from central bankers around the world.

Foreign investors remained net buyers of Indian stocks while domestic mutual funds were sellers. Information technology stocks gained while bank stocks fell.

“Since the overall undertone is strongly bullish, as of now there are no signs of complete sell off, rather it can be interpreted as a small profit taking within the consolidation,” said Sameet Chavan, chief analyst-technical and derivatives at Angel Broking. “For the coming week, 11,600-11,650-11,700 remains to be a cluster of resistance; whereas on the lower side, 11,450-11,380 are seen as crucial supports. Any aggravation below these points would result in an extended correction in our market.”

Chavan said there have been a couple of “reality checks” in the last three weeks, which needs to be seen in between moves going forward.

“Hence, one needs to remain cautious and should ideally avoid aggressive bets overnight,” he said, adding: “Banking space continues to be a spoilsport and in fact, Friday’s correction was solely led by banking stocks as the Bank Nifty slipped below the key support of 22,000 during the session. Hence, one needs to keep a close track on how this heavyweight space behaves in the first half.”

Grasim Industries Ltd., Info Edge India Ltd., Divis Laboratories Ltd. and HCL Technologies Ltd. are expected to relatively outperform the broader markets. “Grasim has entered the leading quadrant. InfoEdge India, Divis Labs and HCL Tech have all rotated inside the leading quadrant taking a sharp positive rotation,” Milan Vaishnav, CMT, MSTA, technical analyst and founder of Gemstone Equity Research, told BloombergQuint.

On the other hand, HDFC Ltd. and Concor Ltd. remain in the lagging quadrant. ICICI Prudential Life Insurance Co. and SBI Life Insurance Co. have also entered the lagging quadrant. These four stocks are likely to relatively underperform the Nifty 50.

Further Gain For Nifty Index ?

Tom Bruni, CMT, technical analyst at All Star Charts, is bullish on the Nifty IT Index. “After nearly two years of consolidation, the Nifty IT Index finally broke out above 16,400 in July, confirming its long-term uptrend and starting its next leg higher towards 23,300,” he told BloombergQuint.

“Weakness in the index’s largest components, Infosys Ltd. and Tata Consultancy Services Ltd., had held the sector back earlier in the year, but they have broken out in July and September and have since pushed the entire group to new heights.”

Bruni said there’s “strength” in Nifty IT Index relative to the Nifty 100 as well. “In addition to the absolute breakout in July, the Nifty IT Index also broke out relative to the Nifty 100, which we use as a proxy for the broader market’s performance. The strong structural breakouts on an absolute and relative basis suggest that this is an area we want to continue betting on,” Bruni said.

“Any weakness back towards 16,300 in the Nifty IT Index should be viewed as a buying opportunity for those with an intermediate to long-term timeframe as we think this sector's trend of outperformance is just getting started.”