Dalal Street Week Ahead: Helpful Braces for New Outbreak After US Supreme Court Ruling

The Nifty traded within a relatively narrow range all week, fluctuating within defined limits before ending modestly higher. The index moved between 25,372.70 and 25,885.30, reflecting largely consolidating undertones despite intraday swings. Volatility increased; India’s VIX rose 8.05% to 14.36, indicating an increase in hedging activity and expectations of near-term volatility. The Nifty ultimately ended the week with a gain of 100.15 points (+0.39%).From a structural perspective, the index continues to consolidate just below a crucial resistance band, while maintaining the broader uptrend. Prices are hovering around the 20-week moving average (25,761) and remain well above the rising 50-week (24,991) and 100-week (24,394) averages, keeping the long-term structure intact. However, the index is currently caught in a broad consolidation zone, and directional conviction remains. A decisive close above 26,250 is needed to confirm a new trend upward move and open the way to higher levels. Until that happens, rallies will likely remain limited, resulting in range-bound behavior. On the other hand, continued trading below 25,000 would weaken the short-term situation and lead to increasing pressure.

Given the US Supreme Court ruling, markets are likely to see a gap-up opening early this week. However, follow-up will be crucial. Immediate resistance levels are placed at 26,000 and 26,250, while support is seen at 25,400 and 25,00. The weekly RSI stands at 51.50 and remains neutral and shows no divergence against the price. The MACD remains below its signal line on the weekly time frame, while the histogram is still in negative territory, indicating that momentum has yet to turn convincingly positive. The final candle reflects indecision near resistance, reinforcing the ongoing consolidation phase. Pattern analysis of the weekly chart indicates that the index is trying to stabilize after recovering from its previous highs. The formation looks like a wide trading range with a mild uptrend, but without confirmation of a breakout. The price continues to respect the rising long-term moving averages, which act as dynamic support. The narrowing Bollinger Bands also reflect decreasing volatility, often a harbinger of an eventual expansion move; however, a directional trigger is still awaited.

Relative rotation charts (RRG) show that the Nifty Financial Services, PSE, Banknifty, PSU Bank, Services Sector and the Metal Indices are in the leading quadrant. While the services sector may lose some relative strength, these groups will collectively outperform the broader markets on a relative basis.

The Nifty IT Index has entered the weakening quadrant. On an individual level, it could see a recovery given recent sales, but relative performance could take a back seat. The infrastructure and auto index are also in the weakening quadrant.

The Nifty FMCG, Pharma and Realty groups are in the lagging quadrant. They may perform relatively worse than the broader Nifty 500 index. The Nifty Media and Energy indices are rotating firmly in the improving quadrant. These groups could continue to improve their relative momentum versus the broader markets.

Important Note: RRGTM charts show the relative strength and momentum of a group of stocks. In the chart above, they show relative performance against the NIFTY500 Index (broader markets) and should not be used directly as buy or sell signals.

Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and Founder of EquityResearch.asia and ChartWizard.ae and is based in Vadodara. He can be reached at milan.vaishnav@equityresearch.asia