Dalal Street week ahead: The trick is to remain sector & stock specific

By Milan Vaishnav,CMT

The domestic equities market ended on a better note on Friday, gaining 115.60 points or 1.24 per cent for the week gone by. In line with what we had mentioned in our previous week's note, realty stocks remained buoyant while auto and bank stocks improved their relative performance on the expected lines.

The forthcoming week is expected to be largely uneventful. We do not expect the Nifty50 to make any major headway and the 9,450-9,475 levels should act as immediate resistance as the 50-stock index continues to gather strength and consolidate.

The overbought nature of the market on the weekly chart should keep the runaway rise of the market in check. The 9,475-9,490 levels will act as immediate resistance for the Nifty50, while supports will come in lower at 9,320 and 9,275 levels.

The Relative Strength Index of RSI on the weekly chart stood at 71.7889. It is a bullish indication, as it marked a fresh 14-period high, but it is still in the overbought territory. The weekly MACD stayed bullish while trading above its signal line. No significant formations were observed on the candles.

A broader pattern analysis presented a simple picture. It showed the primary uptrend is perfectly in place. It was evident that after breaking out of the triple-top resistance levels of the 8,900-8,950 zone, the Nifty50 has been gradually inching upwards with intermittent bouts of consolidation.

All and all, there are high chances that we may see the Nifty50 posting moderate gains or remaining largely in a defined range. The overbought nature of the market shall keep runaway rise in check. We recommend market participants to remain highly sector and stock specific as picking up quality stocks will hold the key for better returns in the week ahead, which is largely expected to see range bound movements with intermittent profit taking at higher levels.



A study of Relative Rotation Graphs or RRG showed realty stocks are expected to continue the buoyancy in the coming week, but at the same time, we also expect to see significant relative outperformance in auto and PSU bank stocks. The IT and metal counters will remain weak. The Nifty Mid50 and select Midcaps will continue to outperform. Energy and Services sector stocks are expected to give up their momentum.

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 the Nifty Index and they should not be used directly as buy or sell signals.