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Nifty - Again ATH, what next? Volatility Persists till the Election Results; VIX @ 16.5 will disrupt the Uptrend.

On Friday, the last trading session of the previous week, showed the Index swinging wildly. We suggested in the previous week's technical note regarding this concern that instances of VIX and the Index rising higher simultaneously often end up showing a warning sign of an impending corrective move.

In the previous week, the market maintained its upward journey yet broadly remained rangebound, with support from March quarter earnings, subdued oil prices, and healthy monthly auto sales numbers.

However, caution about elevated inflation (the US Fed maintained benchmark interest rates at 5.25-5.5 percent), rising volatility, and FII selling capped the market upside.

Post Market Weekly Analysis

The Nifty 50 weekly Index opened at 22475.55 touched the high level of 22794.70 and slipped down to 221348.05 before closing at 22475.85. So the benchmark index oscillated in a range of 446.65 points over the previous week's trading sessions, finally closing on a flat note of 55.90 points, i.e. in percentage term (0.25%) on a week-on-week basis.

Nifty 50 Index Monthly Chart

The monthly chart started showing fatigue and rejection from the highest point of the index. It happens often, and this is common for the market participants to show indecisiveness at the top. But it is too early to say anything about the Monthly chart We will see if it crossed its high level of 22794.70. Below 22300, the market can drift itself towards 22000, the round figure.

Nifty 50 Index Weekly Chart

The weekly chart also shows a strong rejection from the top. No doubt, we are still in a bullish market, but profit booking continues as soon as we touch all-time highs again and again. The level of 22348, needs to be watched, below this, we can see the market drift further down to 21800 levels. For the upside, we need to close above 22800 decisively.

Nifty 50 Index Daily Chart

A piece of fake news spread by TV channels, caused the free spree selling to persist on Friday, the last trading session in Indian Market. It was a trending day for bears.

As per technicals, we will be bearish only if the Nifty 50 Index closes below 21800, else we will consider the market in a bullish phase only. If the weekly close is below 22348, then we can start thinking of market weakness, but we will confirm only if the market crosses and closes below 21777.

Nifty 50 Weekly Fibonacci Chart Status

A very long wick from all-time high suggests that this week, the market can once again touch the 22600 and 22800 mark. the reason is that there are a lot of put-buy positions created by market participants, and any good news can force market participants to run for short covering. The level of 22200, is a strong support on a weekly chart, which should not break.

Nifty 50 Index Weekly Chart -with Technical Indicators

RSI Indicator Pattern

The weekly RSI is 65.61; it stays neutral and does not show any divergence against the price.

Money Flow Indicator

This weekly indicator is at 75.52 which suggests due to high selling by FIIs, the upside is limited up to 80.00 marks.

MACD Indicator Pattern

The weekly MACD stays bearish and trades below its signal line.

Bollinger Band Indicator

A Doji has been formed on the candle; its emergence near the high point has the potential to disrupt the ongoing trend in the markets.

Historically, Doji’s have been more potent comparatively to form reversals; however, they would need confirmation on the next bar.

FII's & DIIs Cash Weekly and Monthly Activities

While the inflow from domestic institutional investors (DIIs) remains strong, action at the desks of foreign institutional investors (FIIs) will also be closely watched by the Street.

In the previous week, FIIs sold stocks worth Rs 2,115 crore in the cash segment, while DIIs bought equities worth Rs 4,164 crore. Thus, DII inflows in the equity market remained much higher than FII outflows for yet another week. In the previous week,

FIIs sold stocks worth Rs 14,704 crore, and DIIs bought shares worth Rs 20,796 crore.

"More than anything else, FIIs will respond to changes in the US bond yields. If the US bond yields fall and the Indian economy and markets do well, they will turn into aggressive buyers.

The US 10-year treasury yield fell from 4.67 percent to 4.52 percent on a week-on-week (WoW) basis, while the US dollar index declined from 105.94 to 105.08 WoW.

Monthly Activities

Weekly (Previous Week's daily activities)

Outlook for the NIFTY 50 Index for the Coming Week

The market is expected to consolidate further with a positive bias in the coming week starting from May 6, with a focus on corporate earnings, the third phase of Lok Sabha (LS) elections, the UK's first quarter GDP numbers, and the Bank of England's (BoE) policy meeting.

On Monday, market participants will first react to lower-than-expected non-farm payrolls data and rising unemployment in the US (which raised hopes of at least two rate cuts by the Fed in 2024), as well as quarterly earnings from Kotak Mahindra Bank.

India VIX:

India VIX, the fear gauge, jumped 33.8 percent during the week to 14.62, the highest closing level since the beginning of March.

Volatility increased significantly in the past week for the seventh consecutive session, after falling nearly 20 percent on April 23, which put the bulls in an uncomfortable position. Going forward, 16.5 is the crucial level to watch, as it has faced resistance multiple times in the months of January and February

Support Level for the Coming Week for NIFTY:

The broader support level on the technical chart could be 22300, followed by 22050 levels.

Resistance Level for the Coming Week for NIFTY:

The broader resistance level on the technical chart could be the level of 22650, followed by 22775 levels.

Important Upcoming Monthly/Weekly Activities

Market participants will continue focussing on the March quarter earnings season, which will enter its fifth week now, and has been broadly in line with analysts' expectations. More than 300 companies will release their quarterly earnings.

Lok Sabha elections

The street will also keenly watch the third phase of voting in the elections next week, on May 7, following a lower voter turnout in phases 1 and 2, at 66.14 and 66.71%, respectively, against 69.53  and 69.50 percent in the 2019 elections.

In the third phase, voting will take place in 96 LS constituencies from 12 states, including Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Uttar Pradesh, and West Bengal.

Global economic data

Globally, investors will keep an eye on the BoE's policy decision scheduled on May 9, and preliminary estimates for Q124 GDP numbers from the UK on the same date.

Weak growth and cooling inflation in the UK set a favorable ground for a policy shift; however, its MPC (Monetary Policy Committee) officials remain split on the timing of the first rate cut in four years, experts said. The consumer price inflation came in at 3.2 percent for March and experts expect it to fall further in April, while the UK's economy entered a technical recession with GDP coming in at -0.3 percent in the last quarter (October-December 2023), against 0.1 percent contraction reported in the previous quarter (Q32023).

Apart from this, the focus will also be on the weekly jobs data from the US; services PMI numbers for April from Europe, Japan, and China; and inflation & PPI data for April from China.

Further, the speeches by FOMC (Federal Open Market Committee) officials will also be watched for cues with respect to the Fed's interest rate decision.

Domestic economic data

On the domestic front, market participants will focus on the HSBC Services PMI (final) numbers for April due on May 6. In March, services PMI stood at 61.2, up from 60.6 in the previous month, and experts expect it to improve further in April.

Further, foreign exchange reserves for the week ended May 3, and industrial production numbers for March will also be released next week, on May 10. Industrial output in February accelerated to 5.7 percent, from 3.8 percent in January this year.

Technical Analysis

Technically, the market seems to be in consolidation mode with the hurdle for Nifty 50 Index at 22,800 on the higher side, and immediate support at 22,300 for the coming week. The index has formed a Bearish Engulfing candlestick pattern on the daily charts, which is a bearish reversal pattern, and there was a Doji kind of pattern formation on the weekly timeframe, indicating indecision. According to experts, if the index decisively takes out 22,800 on the higher side, then 22,950-23,000 are the levels to watch, which coincides with the upper range of the rising channel.

The Nifty 50 has demonstrated resilience around the 22,300 level, suggesting a potential upward trajectory towards 22,700-22,800 levels following the ongoing consolidation phase, provided the index maintains closure above this level. However, a break below 22,300 could lead to a downward movement towards the 22,000 level.

Reading Current Option Data

Weekly options data indicated that 22,700-22,800 is expected to be the resistance for the Nifty 50, with support at the 22,000 level. It means the 22,000 mark is going to be crucial to watch, for further downside.

On the Call side, there was maximum open interest at 22,800 strikes, followed by 23,000 and 22,700 strikes, with maximum writing at 22,800 strikes, then 22,500 and 23,000 strikes. On the Put side, 22,000 strikes saw the maximum open interest, followed by 21,800 and 22,500 strikes, with maximum writing at 22,000 strikes, then 21,900 and 22,100 strikes.

Participant Wise Final F&O Weekly Summary

FII's, PRO, and Clients F&O Summary by Segment

1). FII's positions as of the last trading day:

2). PRO's position as of the last trading day:

3). CLIENT's position as of the last trading day:

Summary - Overall

The pattern analysis of the weekly chart shows that Nifty continues to trade in a small rising channel and the 20-week MA which is currently placed at 22045 happens to be the nearest support for the Index. If this level gets violated, then it would be the first sign of the markets likely taking some breather and the present trend getting temporarily disrupted.

All in all, the markets are likely to adopt some defensive bias going forward; we may see some defensive pockets doing well over the coming days. Some technical rebounds too can be expected. However, it is strongly recommended that we use these technical rebounds as and when they occur to protect the profits at higher levels. Fresh purchases should be done extremely carefully and only in the stocks that are developing or bettering their relative strength against the broader markets. A cautious approach is advised for the coming week.

Thanks for reading.

Keep Trading

Stay Invested


Neeraj Bhatia

(Managing Director)    

Disclaimer: I am a National Stock Exchange-certified Technical Analyst and Chartist but not a SEBI-registered analyst, so consult your financial advisor before taking any trade. This technical weekly post-market journal is only for learning purposes and it is downloadable free of cost. The views written here are entirely only my personal views. I am not forcing anyone to follow my thoughts. I do not have any WhatsApp Group ID or Telegram ID related to it.

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