Weekly Trend Report
- 11th January 2025
Week Gone By
Domestic equity benchmarks posted significant losses this week, largely due to weak economic data. Concerns over India’s foreign exchange performance and GDP growth projections pointing to a four-year low further weighed on market sentiment. This lower-than-expected growth is attributed to weak industrial and investment activity. Meanwhile, rising consumer price inflation in China and annual inflation in the Euro area added to global market jitters. Overall, the market ended on a negative note, with investors remaining cautious ahead of key developments.
Week Ahead
The domestic equities are likely to witness volatile trading next week as investors keenly await the release of Q3 earnings from major companies. Following the the earnings season, investor attention is expected to shift towards India’s upcoming Union Budget and the policy decisions of the new Trump administration in the United States. These events are anticipated to have a considerable influence on market trends in the near future. On the domestic front, India’s retail inflation (based on CPI) data for December will release on Monday, 13 January 2025. India’s WPI-based wholesale inflation for December will release on Tuesday, 14 January 2025. India’s balance of trade data for December will release on Wednesday, 15 January 2025.
Technical Overview
- The benchmark index began the trading week by extending the selling pressure observed in the previous week, thereby establishing a bearish sentiment in the market. The index displayed a downward trend throughout the week, concluding 573 points lower than the prior weekly close. This movement was accompanied by a 10% increase in the VIX, which suggests rising fear and volatility among investors.
- The week ended with the majority of broader and sectoral indices exhibiting significant downward pressure, alongside deteriorating negative momentum, marking a troubling development for the market.
- Market breadth remained unfavorable and in an oversold condition. The proportion of stocks trading above shorter-term moving averages has persisted below the median threshold, with potential for further deterioration.
- The percentage of stocks trading above the 200 and 50 DMA has been below the median for the fourth consecutive week, while those below the 200-daily moving average indicate a pressing concern.
- On the momentum market breadth front, deteriorating numbers were observed following a slight recovery. Additionally, several associated parameters reached historic lows, reflecting ongoing weakness in general stock participation and indicating that the markets are exhibiting a significant downswing across all timeframes.
- From a technical perspective, the zone of 23340-23250 represents a critical support level. The index is currently trading below the 50-week moving average, which is situated near 23650. A decisive reclaiming of the average line will be essential to attract bullish support.
- Given the prevailing oversold conditions in the market, it is likely that the overall bearish trend will persist; however, a reversal day appears imminent.
- A gap-down on Monday could set the stage for an immediate technical reversal.
- The pivotal zone near 24250 is expected to serve as formidable resistance. It is advisable to maintain a cautious stance in the current no-money market conditions, as the swing confidence of the overall market stands at zero, indicating that portfolios should refrain from undertaking any open risks.
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