What The Charts Are Saying About Nifty 50
Indian markets ended lower for a second straight week, tracking global peers and as investors remained unenthused by the relief package announced by the finance minister.
The Nifty 50 Index fell to as low as 9,050 in intraday trade on Friday, more than 500 points down from its high of 9,584.5, before recovering in the last hour of trade to end 1.32 percent lower for the week.
“The primary trend for Nifty continues to remain negative as it trades below its multi-year rising trendline. Markets do not look much enthused with the fiscal stimulus that is being released in a portion every day. A soft start is expected for the week,” Milan Vaishnav, CMT, MSTA, technical analyst and founder of Gemstone Equity Research, said. “The levels of 9,235 and 9,510 will act as overhead resistance points. The supports will come in at 9,000 and 8,835 levels. The trading range is expected to widen in the coming week.”
The Relative Rotation Graph, used to gauge relative strength of equities against a common benchmark and each other, suggest underlying weakness in the frontline indices is financials, according to Vaishnav.
The RRG charts show that ICICI Bank Ltd., Axis Bank Ltd., Bajaj Finserv Ltd. and Bajaj Finance Ltd. appear to be losing their relative momentum and are seen languishing in the lagging quadrant when compared against the Nifty 50. These stocks are expected to underperform the Nifty, Vaishnav said.
Hero MotoCorp Ltd., Reliance Industries Ltd., Britannia Industries Ltd. and Sun Pharmaceutical Industries Ltd. are positioned in the leading quadrant on the RRG when benchmarked against the Nifty 50 Index. These, Vaishnav said, are likely to outperform the headline index.
The relative analysis of all indices against each other revealed one standout trend: Nifty Infrastructure ended its six-year underperformance against Nifty Services Index.
The Relative Strength of the two indices — Nifty Infra Index divided by Nifty Services— reversed multi-year downward trajectory and moved past its 50-week moving average.
According to Vaishnav, the technical chart shows a bullish breakout.
The Relative Strength Index, too, is indicating bullish divergence in favour of infra gauge against the price over the past several months.