Dalal Street week ahead: Nifty scales record high, but limited market support signals caution around 26,300

Markets remained largely within range last week, but managed to end on a positive note. Nifty hovered within a narrow intraweek range of 467.50 points while moving between the 25,842.95 and 26,310.45 levels. Although the index recorded a new all-time high, the move was not supported by strong participation in broader markets. Meanwhile, India’s VIX fell sharply by 14.77% on the week to end at 11.62, a level that keeps overall volatility subdued. Nifty ended the week with a modest gain of 134.80 points or 0.52%. The month also ended; Nifty gained 480.85 points monthly.

The current technical situation suggests that while Nifty is in an uptrend and continues to reach new highs, the overall market environment remains somewhat narrow. This is indicated by the broader Nifty 500 Index, which is still more than 2.5% behind its all-time high. This underperformance of the broader markets highlights the lack of widespread strength and breadth. The index is trying to break out above long-term trendline resistance; however, the move is yet to receive decisive confirmation. This makes the current zone of 26,200–26,300 not only a new high area, but also a zone of potential resistance and decision-making.

The coming week may see a stable to slightly positive start, but sustainability above 26,300 will be crucial for further upside potential. On the higher side, the 26,310 and 26,500 levels will act as resistance. There are supports at the 25,950 and 25,700 levels. These levels will be critical in determining the next change in direction.

The weekly RSI stands at 64.06; it remains in bullish territory and continues to mark higher lows, although no bullish or bearish divergence against the price is observed. The weekly MACD is bullish as it is trading above its signal line. No significant candlestick pattern is observed, indicating a continuation of the existing trend unless disrupted by external factors. From a pattern analysis perspective, Nifty is seen testing a break above the upper trendline resistance of a broad consolidation zone. It has managed to close above this trendline for the fifth week in a row, albeit without major momentum or volume support. The index remains above all of its major moving averages – the 50-, 100- and 200-week averages – reinforcing the primary uptrend. The Bollinger Bands remain wide and prices are close to the upper band, indicating strength, but also the potential for mean reversal if momentum weakens. Given the prevailing conditions, market participants would be better off taking a measured and stock-specific approach. While the index remains structurally strong, the lack of participation from the broader universe and weakening market breadth warrant some caution. It is advisable to monitor gains on existing positions and avoid aggressively chasing momentum until broader confirmation is visible. The method to approach the week ahead would be one of cautious optimism: participating selectively and proactively managing risk.In our look at Relative Rotation Graphs, we compared several sectors against the CNX500 (NIFTY 500 Index), which represents more than 95% of the free-float market capitalization of all listed stocks.

The Nifty Midcap 100 Index is alone in the weakening quadrant; however, relative momentum is seen to be improving.

The media, consumption, commodity and FMCG indices continue to languish in the lagging quadrant. They may underperform the broader markets relatively. The Pharma Index is in the lagging quadrant, but improving in relative momentum.

The real estate, IT, PSE, services sector and energy indices are in the improving quadrant. From now on, they can improve their relative performance.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)