Nifty tests support zone in middle of corrective market phase; Watch carefully weeks ahead

Markets have been trading under constant pressure throughout the week and have ended on a distinctly negative note. After initially attempting a modest recovery, the Nifty suffered a sustained sell-off at higher levels and moved lower as the week progressed. The index is moving within the defined range of 25,771.45 on the upside and 25,141.30 on the downside. Volatility cooled, with India’s VIX down 4.60% to 13.70 on the week. Nifty closed the week with a net loss of 392.60 points (-1.54%).

The broader technical structure remains aligned within a larger uptrend. On the weekly chart, the Nifty continues to move just above its 50-week moving average (25,047), while staying well above the 100-week (24,422) and 200-week (21,571) averages, maintaining a long-term bullish pattern.

However, the index is trading below its 20-week moving average (25,756) and near the lower Bollinger Band (25,065), indicating short-term weakness. The price action over the past few weeks has been similar to a slight downtrend in a broader bullish structure, suggesting a loss of upside momentum. A sustained move above 25,800 would be necessary to negate the current short-term weakness and open the door for a directional upside. On the downside, a decisive breach of the 25,000-24,950 zone could create increasing corrective pressure towards lower support. On Tuesday, March 03, as a business holiday on Holi, the broken week may begin cautiously amid the prevailing softness. Immediate resistance levels are seen at 25,350 and 25,550. Key supports are placed at 25,050 and 24,700.

Weekly RSI stands at 46.27; It remains neutral but low and does not show any significant upside or bearish divergence against the price. The weekly MACD remains below its signal line but is in positive territory. The indicator has formed a relatively broad bearish candle on the weekly chart, reflecting a high level of dispersion.
From the pattern point of view, Nifty seems to be facing a temporary consolidation after a long period of upswing. The indicator examines the combination of the lower Bollinger Bands and the 50-week moving average, a zone that could suggest an arbitrage. Failure to hold this band could lead to a deep pullback towards the 100-week average. A broad higher-higher-higher-lower structure remains on the long-term chart, but the near-term price behavior suggests a break with a corrective bias but no structural damage on the technical front at the moment.
In the coming shortened week, a cautious and selective approach would be wise. Traders should avoid fresh longs until the index rebounds with strength above 25,800. At the same time, any breach of 25,000 should be closely monitored for follow-up weakness. Protecting existing gains, maintaining tight stop loss, and focusing on specific opportunities in stocks with relative strength will be essential. The most effective approach for the week will be to remain measured, quick, and responsive to key levels rather than predicting directional movement ahead of time.
In our view of the relevant rotation graphs, we compared various sectors against the CNX500 (NIFTY 500 Index), which represents 95% of the free float market cap of all listed stocks.

Relative Rotation Graphs (RRG) show that the Nifty Energy Index and the Infrastructure Index have roles within the leading quadrant. However, Nifty Financial Services, PSE, Nifty Bank, PSU Bank, and Nifty Metal Index are also within the leading quadrant. The group is expected to collectively outperform the broader Nifty 500 index.

The Nifty Services Sector Index has fallen within the weak quadrant. Midcap 100, Auto, and IT indices are also in this quadrant. These groups may observe specific movements of individual stocks; However, relative performance may be slow.

While the Nifty Realty Index continues to remain within the lagging quadrant, the FMCG index shows little improvement in its relative movement against the broader market while remaining in the lagging quadrant.

The Nifty Pharma index has rebounded within the improvement quadrant. Nifty Media Index is also inside the improving quadrant.

Important note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above chart, they show relative performance against the NIFTY500 index (broad markets) and should not be used directly as buy or sell signals.

(The author is Milan Vishnu CMT, MSTA Consulting Technical Analyst)

((rejection: The recommendations, suggestions, opinions and views given by the experts are their own. (It does not represent the views of The Economic Times.)