Weekly Trend Report
- 25th November 2024
Week Gone By
The key equity benchmarks concluded a truncated week with modest gains after Friday’s major rally following strong US labor market data. The Nifty closed above the 23,900 level, and the Sensex settled above the 79,100 mark. The HSBC Flash India Composite Output Index stood at 59.5 in November compared to 59.1 recorded in October, indicating a sharp rate of expansion that was the strongest in three months and above its long-run average. On the global front, US retail sales increased slightly more than expected in October, rising 0.4% last month, above the 0.3% expected, and compared with the upwardly revised 0.8% advance in September. Robust consumer spending helped the economy maintain its strong pace of growth last quarter.
Week Ahead
Next week, The domestic equity market may respond to the outcome of the Maharashtra Assembly election results over the weekend. India’s GDP growth data for the third quarter will release on Friday, 29 November 2024. The Indian economy expanded by 6.7% from the previous year in the June quarter of 2024, slowing from the 7.8% increase in the earlier period. US FOMC minutes on Wednesday, 27 November 2024 will reveal insights into the Federal Reserve’s recent rate cut to 4.50-4.75%, following Donald Trump’s 2024 presidential victory. Japan’s consumer confidence data for November is set to release on Friday, 29 November 2024. The consumer confidence index in Japan declined to 36.2 in October 2024 from September’s five-month high of 36.9.
Technical Overview
- The benchmark index began the week under selling pressure, continuing its corrective decline from the preceding week. During the first four trading sessions, the price action demonstrated an inability to maintain momentum at the day’s high, consistently closing in the lower quartile of the trading ranges.
- This trend resulted in a test of the 50 Weekly Moving Average (MA) for the first time since April 2023. However, after this test, the index experienced a long-awaited technical recovery, culminating in a closing increase of 374 points from the prior week and successfully reclaiming the 200 Daily MA. The volatility exhibited a modest increase, as evidenced by a rise of 8.95% in the India VIX, which reached 16.1.
- The trading week concluded with the majority of broader and sectorial indices reflecting a downtrend, accompanied by a worsening of negative momentum. However, several sectorial indices began to show early indications of diminishing negative momentum, which is a positive development.
- In terms of market breadth with regards to extension, the percentage of stocks trading above the 10 and 20 Daily MAs (DMA) continues to reside in oversold conditions. Nonetheless, the weak rebound observed on Friday suggests that these figures may not persist in oversold territory.
- Furthermore, the percentage of stocks trading above the 50 DMA has remained below median levels for the eighth consecutive week. More concerning, the breadth above the 200 DMA has also sustained below median levels for a second consecutive week; continued sub-median performance for at least one month may indicate a transition from a bull market to a bear market.
- Throughout the truncated trading week, the momentum market breadth remained weak, though a mild recovery on the final day suggests a potential transition from a no-money market environment to a hard-money market.
- From a technical perspective, the Nifty index is currently testing significant resistance levels and is not entirely out of volatility concerns. As we approach the expiry week of the monthly derivative series, the forthcoming days are likely to be influenced by rollover-centric activities. The zone of 23350-23250 represents critical support, and its maintenance above this threshold will be essential to mitigate further drawdowns. We anticipate a meaningful technical pullback, with pivotal resistance identified near 24535 and 50 DMA, which is currently trading near 24780, potentially serving as a substantial resistance zone.
- The prevailing market swing confidence remains at a neutral level, indicating that portfolios should exercise caution and refrain from assuming any open risk at this time. It is advisable to await further technical evidence, such as a closing above the designated 24150-24200 zone, to confirm the establishment of a base formation at the current low points.
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