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Dalal Street week ahead: Soaring VIX and F&O expiry promise choppier times ahead

We need to approach the market more cautiously now than before.

Updated: Apr 20, 2019, 05.35 PM IST
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Keeping all these in view, investors and traders are suggested to maintain a highly cautious outlook for the coming days.
The week gone by remained quite eventful for the Indian equity market. The short three-session trading week saw the benchmark Nifty50 mark a fresh high and attempt a breakout. Along with that, it also saw Nifty not confirming this breakout and slipping once again below the all-important 11,760 mark.

It was the third week in a row when the market did not make any major directional move and ended with a net weekly gain of 109.35 points, or 0.94 per cent.

The coming week will see the expiry of April derivative series and this is likely to induce volatility. The VIX is rising in an unabated manner, having climbed 8.27 per cent to 22.74 last week. The VIX is now at a multi-point high level, defying its usual negative/inverse relationship with the markets, a situation last seen only in early 2016.

We need to approach the market more cautiously now than before. As of today, the double top resistance at 11,760 remains intact and it has not been taken out. Even if there is a mild positive move at the start of the week, one would need to deal with it with a high degree of caution, as the lead indicators of the market have been persistently showing a bearish divergence.

Nifty is likely to see the 11,850 and 11,910 levels act as immediate resistance points in the coming week. Supports should come in much lower at 11,600 and 11,520.

The Relative Strength Index (RSI) on the weekly chart stood at 68.9221. The weekly MACD continues to remain positive and trades above its signal line. Apart from a white body that occurred on the candles, no other significant formations were seen.

With the earnings season on in full swing, we will continue to see stock-specific volatile actions in certain pockets of the market. The market will continue to remain stock-specific in nature in the week ahead. The market will also keep an eye on the depreciating USD-INR pair and rising crude oil prices and this, along with sharply rising volatility (VIX), is not going to make life any easy for the market going ahead.

Keeping all these in view, investors and traders are suggested to maintain a highly cautious outlook for the coming days.
In our look at 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 Relative Rotation Graphs (RRG) shows like the previous week, the outperformance is likely to be limited to select groups.

Realty stocks are firmly placed in the leading quadrant and are likely to maintain their momentum. They are likely to relatively
outperform the broader CNX500. Along with them, auto, media, metals, pharma and CPSE stocks are likely to show resilience. These groups are placed in the improving quadrant and are likely to continue improvement on their relative momentum.

Apart from the realty index, the only other index that is in leading quadrant is energy. However, it is likely to take a knock on the relative momentum front and is expected to weaken further.

All other important indices such as Bank Nifty, services sector index, financial services, PSU banks, consumption and FMCG are seen drifting lower and no exceptional performance is expected from these groups.

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.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of

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