Week Ahead: Nifty Closed with Net Gain, but Losing Momentum

MUMBAI, India – The previous week’s risk-on global setup has started the week prior, and the result has driven the Indian stock market relatively higher this week even to reach new lifetime highs.

Although the optimistic momentum of the market has faltered a bit, there wasn’t any sign that it could experience a retracement. Instead, Indian stocks continued to reach for gains at much higher levels. Over a couple of days, the Nifty benchmark index has experienced a range-bound movement. However, it gained as the week closed, marking a 1.53% advance and going up by around 185 points for the week.

According to strategists, although the index is trading near its lifetime highs, there are still several factors that the market should consider. For one, the loss of momentum for the Nifty index is evident on the chart despite it reaching lifetime highs. The index’s loss of momentum would also suggest the market breadth is starting to weaken.

For the week, the INDIA VIX volatility index has cooled off by a significant value. The index marked a 7.33% decline, going down towards 12.32 points, marking its lowest trading value in recent months. Although the decline doesn’t suggest any downtrend near-term, it is something to consider by market players.

On the week ahead, the Indian stock market is more likely looking towards a more subdued trading week as the Nifty index remains to trade in uncharted territory. It will find resistance between the 12,310 and 12,400 levels, while support will strengthen in the lower levels between 12,170 and 11,900.

With any corrective move in the market, the index could look towards trading in a broader range than usual.

On the other hand, on the weekly chart, the Relative Strength Index was seen trading at 66.44 points, remaining relatively unchanged and not suggesting any divergence against its current value.

The PPO continues to be optimistic, while the MACD is mostly bullish as it continues to trade over the signal line.

Based on the pattern analysis of the Nifty in the weekly charts, the index has reached a breakout since it moved past the 12,100 levels on a closing basis. Although there is a weakening momentum for the Nifty index based on the charts, it is still expected to continue with the breakout as long as it stays over the 12,100 marks.

Although an uptrend for the Nifty index is possible in the coming week, strategist recommends that investors and traders consider that the market stays somewhat overextended and overbought on the charts, which often suggest that it is taking a breather.