The domestic equity market finished one of the most eventful weeks as the general election results were announced. Though the move remained mostly on the expected lines, the timing got little awry as the market showed bulk of its reaction by rising after the exit polls and not waiting for the actual results. The election results saw both Nifty and Sensex test their historic highs and then retrace on account of profit taking.

After an extensively wide trading range, the headline Nifty index finally settled with net gains of 436.95 points or 3.83 per cent for the week. Despite the market moving all over the place during the week, technical charts showed relatively less obscure moves on the weekly charts. The noise levels on the longer time frame charts were much less compared with those on the daily charts. The reason behind such market behaviour was that the reaction to the general election outcome.

Another significant technical development that occurred during the week was a sharp drop in VIX. The market’s reaction to the election results was so measured, unanimous and without any tug of war between the market participants that it saw India VIX decline 41.34 per cent to 16.47. That the reaction to the election results was measured and unanimous is clear on the charts as Nifty remained well within the secondary channel and has not violated any of the levels on either side.

We expect a steady start to the week ahead, and the coming week will continue to see the market digest the political outcome. The trading range is expected to remain wide, and the 11,930 and 12,050 levels will act as immediate resistance. Supports, on the other hand, will come in at 11,600 and 11,510 levels.

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The weekly RSI stood at 64.1270. It showed a bearish divergence from the price as the RSI did not mark a fresh 14-period high while Nifty did so. The weekly MACD stayed bullish as it traded above the signal line. A rising window occurred on the candles.


The formation of a rising window resulted in a gap and signalled a possible continuation of the uptrend. Pattern analysis does not show any unusual move on the chart. Nifty continues to trade in the secondary channel that it had formed after breaching the primary upward rising channel in October 2018. The lower trend line of this primary channel will continue to provide resistance to Nifty going forward.

Even though volatility declined during the week that has gone by, we expect it to resurface again, though on a moderate level. The market is likely to turn highly selective and somewhat volatile. We recommend adopting a judiciously selective approach while selecting stocks and continue protecting profits at higher levels.

In our look at the Relative Rotation Graphs, we compared various sectors against CNX500, which represents over 95 per cent of the free float market-cap of all the listed stocks. A review of the Relative Rotation Graphs (RRG) showed the financial services index and Bank Nifty have shown a sharp improvement in relative momentum and moved in the leading quadrant. These groups, along with the services sector index, are likely to relatively outperform the broader market.


PSU banks, too, remain in the leading quadrant, but they seem to be stalling their momentum after a good rise over the past several weeks. The Infrastructure Index remains in the improving quadrant and is seen improving its relative momentum as well. A sharp drop in momentum was observed in the Media, Pharma, Small cap, NIFTY Junior, Midcaps and Auto indices. They may not see any significant outperformance against the broader market. The FMCG and Consumption indices are seen trying to consolidate their performance. Some stock-specific performance may be expected from these packs.

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 NIFTY500 Index (broader market) and should not be used directly as buy or sell signals.



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