The Nifty traded in a broadly sideways and range-bound manner throughout the previous week, ending with a modest decline. The index oscillated within a narrow 276-point range, between 25,144.60 on the higher end and 24,918.65 on the lower end, before settling mildly lower. The India VIX declined by 3.60% over the week to 11.39, suggesting continued complacency in the markets. On a weekly basis, the Nifty ended with a net loss of 181.45 points or (-0.72%).
Market Overview
The Nifty is currently consolidating just below a key resistance zone after attempting a breakout above a rising channel. This area, between 25,100 and 25,350, has proven to be a supply zone where profit-taking has emerged. While the broader trend remains intact and the Nifty stays above key moving averages, it continues to move within a complex consolidation zone.
This pause in momentum follows a sharp up move from the April lows near 21,743. A strong breakout above the 25,265–25,350 range, with closing confirmation, could resume the uptrend. Conversely, a sustained move below 24,750 may trigger further weakness and drag the Nifty toward lower support levels.
Key Levels to Watch
As we head into the new week, the markets may see a cautious start amid the current range-bound setup. Immediate resistance is at 25,150, followed by 25,400. On the downside, key support levels are placed at 24,750 and further near 24,380.
The weekly RSI stands at 56.54 and remains neutral, without any divergence against price. It has made a fresh 14-period low, which is mildly bearish. The MACD remains above its signal line on the weekly chart, continuing to indicate a positive crossover. No significant candlestick formations were observed during the week.
Technical Outlook
From a pattern analysis perspective, the Nifty is trading just below the upper bound of a rising channel that it had briefly broken out of. With the index slipping below the 25,000–25,150 support zone, it faces resistance at these same levels again, failing to confirm the previous breakout.
Price action remains above the 20-week and 50-week moving averages, maintaining a bullish undertone in the medium term. However, the ongoing sideways movement suggests a lack of fresh directional conviction.
Trading Strategy
Given the current technical setup, traders should remain selective and protect profits at higher levels. The market is not showing signs of strong bullish momentum, and unless there is a convincing move above 25,350, a stock-specific approach with tight risk management is recommended.
Avoid aggressive fresh buying until a clear directional move is established. Adopting cautious optimism with a focus on stocks exhibiting stronger relative strength would be the ideal strategy for the coming week.
Sectoral Overview
A sector-wise comparison against the CNX500 (Nifty 500 Index), which represents over 95% of the market capitalization of listed stocks, reveals interesting patterns:
- Leading Quadrant: The Nifty Media and Metal indices have moved into the leading quadrant. The Midcap 100, Realty, and PSU Bank indices are also leading, indicating potential outperformance relative to the broader market.
- Weakening Quadrant: The Nifty Bank, PSE, and Financial Services indices are showing signs of weakening momentum and may underperform in the short term.
- Lagging Quadrant: The Nifty Services Sector, Pharma, Consumption, and FMCG indices continue to underperform. However, the Pharma index shows signs of improving relative momentum.
- Improving Quadrant: The IT index continues to strengthen its relative momentum against the benchmark, while the Auto index, though in the improving quadrant, is showing early signs of deterioration.
Important Note
Relative Rotation Graphs (RRG) display the relative strength and momentum of various sectors against the broader Nifty 500 Index. They are intended for assessing relative performance and should not be used directly as buy or sell signals.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
