Dalal Street week ahead: Nifty in no mood to rally; keep buying on dips

After closing on a flat note for the week before last, the week just gone by saw the market end with minor gains. On a week-to-week basis, Nifty gained 91 points, or 0.86 per cent. In our previous weekly note, we had mentioned about the formation of a probable lower top. This formation would still remain the resistance area for the Nifty in the coming days.

As we step into the coming week, we face an important economic event, which is RBI’s credit policy review, whose outcome will be known on June 6. Apart from this, we do not see any major trigger for the market or a runaway rally in the coming week.

The falling trending line that has emerged out of the formation of a lower top is likely to resist any significant rise that the market may attempt.


The coming week will see the 10,790 and 10,865 levels play out as immediate resistance for Nifty. Supports should come in lower at 10,610 and 10,515 levels. The range remains wide on either side.

The weekly relative strength index, or RSI, stands at 57.7511 and it remains neutral, showing no divergence against price. The weekly MACD stays bullish even as it trades above the signal line. No significant formations were observed on the candles.

Pattern analysis shows after forming a lifetime high of 11,171, the Nifty50 formed a lower top at 10,930. The emergence of a lower top has resulted in the formation of a falling trend line that joins these two levels. In the coming week, this will pose resistance to the Nifty50 in the event of any attempted bounce.

Overall, even though there is no likelihood of the Nifty witnessing any runaway rally, beyond a point it remains very much in the 28-month-long upward rising channel.

The market is likely to remain extremely stock-specific during the coming week. We recommend spotting buying opportunities that any correction may offer and at the same time, continuing with the strategy of protecting profits at higher levels.

A study of Relative Rotation Graphs or RRG showed financial services stocks should continue to relatively outperform the broader market in the coming week. They are likely to be accompanied by FMCG stocks, which still remain in the leading quadrant but are slowing down some bit. Apart from this, we expect PSU banks and components of Bank Nifty to attempt and improve their relative momentum.

Apart from, this some isolated and sporadic outperformance can be expected from the metals, public sector enterprises and realty packs. We do not expect any significant outperformance from the broader market as all broader indices like Midcaps, CNX100, CNX200 and CNX500 have lost momentum. Auto stocks, too, are unlikely to put up any significant show.

Important Note: RRGTM charts show you the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance as against NIFTY Index and should not be used directly as buy or sell signals.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)