Dalal Street Week Ahead: Nifty Sees Further Consolidation Ahead of Next Directional Move

The markets witnessed a week of mild corrective moves as Nifty traded in a slightly downside consolidation phase and ended the week on a negative note. The index fluctuated in a range of 485 points, between 26,178.70 and 25,693.25. Despite a supportive environment from the Fed with a 0.25% rate cut and a temporary deterioration in breadth, the index faced resistance near recent highs. India’s VIX fell -2.01% to 10.11, reflecting continued complacency and low demand for hedging. Nifty ended the week with a slight loss of 139.50 points or -0.53%.

The broader structure of the Nifty remains bullish, yet the index is navigating a major inflection zone. It continues to hover above the descending trendline and encounters resistance around 26,150–26,200. The continued price action reflects the hesitation to decisively remove this resistance. The lack of clear catalysts, such as the unresolved US-India trade deal, contributes to the inertia. That said, the Fed’s dovish stance could provide a tailwind in the medium term, but for now the index appears to be in a technical pause within an established uptrend. A decisive move above 26,200 will be needed to confirm another breakout and extend the trend.

Given the current setup, the coming week may see a cautious to flat start. Initial resistance is at 26,200 and 26,300, followed by a stronger barrier near 26,550, the upper Bollinger band. On the downside, immediate support is at 25,750, followed by the 25,600 zone.

The weekly RSI stands at 61.34; it remains in the bullish zone and shows no divergence against the price, indicating a neutral momentum bias. The MACD is above its signal line and continues to maintain a positive crossover. The latest candle is a small bearish candle with a moderately longer lower shadow near resistance, indicating near-term indecision or exhaustion.

From a pattern perspective, Nifty remains above the symmetrical triangle it has broken out of. The Index is experiencing a small loss of strength as it consolidates above its breakout point and just below its peak. While such loss of strength and consolidation near resistance traditionally carry bearish implications, its upper limit is being repeatedly tested, which also reflects strength. The index is trading well above all major moving averages (20, 50, 100, 200 weeks), indicating that the larger trend remains intact and upward, but a clear break above the wedge is still awaited.

In light of the technical and macroeconomic situation, traders should remain moderately cautious. It is advisable to protect gains at higher levels and avoid aggressive long positions until a breakout above 26,200–26,300 is confirmed. A stock-specific approach, with an emphasis on relative strength and risk management, is preferable. The method of approaching the week ahead should be defensive, selective and responsive to any confirmation of an outbreak.

In our look at Relative Rotation Graphs®, we compared several sectors to the CNX500 (NIFTY 500 Index), which represents more than 95% of the free-float market capitalization of all listed stocks.

Relative Rotation Charts (RRG) show that the Nifty Financial Services and the Midcap 100 Indices have rolled within the leading quadrant. The Nifty Bank, Infrastructure and PSU Bank Indices are also in the leading quadrant. These groups are expected to perform relatively better than the broader markets.
The Nifty Metal and Auto indices are in the weakening quadrant. While stock-specific performance of these sectors cannot be ruled out, their relative performance may slow somewhat.

The nifty PSE, commodity and energy indices have fallen into the lagging quadrant. Along with them, media, consumption and FMCG are also placed in this quadrant. They are expected to underperform the broader markets relatively.

The real estate, IT and services sector indices are in the improving quadrant.

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.