Dalal Street Week Ahead: Smart Eyes Break Above 25,550 as Auto, Metal and PSU Banks Lead the Momentum

The markets traded positively throughout the week as Nifty continued its upward move and remained within a certain range. The index fluctuated in a narrow band of 448.70 points and moved between 24,881.65 and 25,330.75. Despite intra-week volatility, the index managed to post a net gain of 391.10 points, or 1.57%, on a weekly basis. India’s VIX rose marginally higher by 0.42% to 10.10, hovering around multi-month lows.

The current technical setup reflects a market that is in the process of challenging a key resistance zone. Nifty has moved closer to the top of a major symmetrical triangle formation that has been developing since late 2024. The upper trendline of this triangle, which has offered strong resistance in the past, is now being tested again. The index is still in a broad consolidation zone, and unless a breakout above 25,550-25,600 is confirmed, the broader market will continue to exhibit range-bound behavior. The bias remains slightly bullish, but a decisive move outside this resistance zone, supported by strong volumes, will be essential to confirm a new breakout. Meanwhile, global developments – particularly escalating trade tensions between the US and China and renewed concerns over the semiconductor supply chain – could fuel a sense of risk as geopolitical risks escalate.

Markets may get off to a tepid or cautious start in the week ahead, especially in light of global macroeconomic concerns. Immediate resistance is expected at 25,400, followed by 25,580, which also ties into the upper Bollinger Band. On the downside, the supports are likely near the 25,000 and 24,850 levels. The weekly RSI stands at 57.13 and remains neutral and shows no divergence against the price. It maintains a bullish bias while remaining below the overbought level. The MACD is below the signal line but narrowing, indicating that while momentum remains positive, it is not aggressively strengthening. No significant candlestick pattern was observed this week, although the close near resistance can be interpreted as a test of strength.

From a pattern perspective, Nifty remains within a long-standing symmetrical triangle formation, oscillating between converging trend lines. This pattern has historically led to strong directional movements in problem solving. The index also continues to trade well above all major moving averages (20-, 50-, 100-, and 200-week), reinforcing the bullish undertone. However, the narrowing range and flattening of the Bollinger Bands suggest that a big move is in store soon; directional clarity will only emerge upon a confirmed breakout or breakdown.

Given the situation, a balanced and stock-specific approach is warranted for the coming week. While the broader structure is positive, traders should remain aware of the critical resistance testing the Nifty. Protection of profits becomes essential at higher levels, and aggressive long positions should be avoided until a breakout is confirmed with persistence. The best method to approach the week ahead is to follow gains, maintain tight stop losses, and stay stock specific while keeping a close eye on macro triggers.

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.

Relative Rotation Charts (RRG) show that the Nifty Auto, Metal and PSU Bank Indices are the only groups that are in the leading quadrant. These groups are likely to continue to perform relatively better than the broader Nifty 500 Index.

The Nifty Midcap 100 Index remains within the weakening quadrant. This could slow the relative performance of the broader markets somewhat.

The Nifty Commodities Index has entered the lagging quadrant. The financial services, consumption, energy, services sector and media indexes are languishing in the lagging quadrant. The infrastructure, PSE and real estate sectors are also in the lagging quadrant, but are improving their relative momentum against the broader markets.

The Nifty Pharma and FMCG indices are in the improving quadrant. However, they give up their relative momentum and return to the lagging quadrant. The IT index is in the improving quadrant. This group could see better relative performance versus the broader markets in the coming days.

(Milan Vaishnav, CMT, MSTA, is a consulting technical analyst and founder of EquityResearch.asia and ChartWizard.ae based in Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)