Weekly Trend Report
- 30th December 2024
Week Gone By
The market witnessed modest gains during the holiday-thinned week. The absence of major market-moving events, with most key events either concluded or scheduled for January, most likely kept investor participation muted. However, broader market relatively underperformed the frontline indices. India’s foreign exchange reserves dipped by $1.98 billion to $652.87 billion as of December 13, according to data shared by the Reserve Bank of India (RBI) on Friday. On the Global front, Investors assessed November inflation numbers from Tokyo, which saw its headline inflation rate come in at 3%, compared to 2.6% in October. Core inflation, which excludes costs of fresh food, rose to 2.4%. Tokyo’s inflation numbers are widely considered to be a leading indicator of nationwide trends.
Week Ahead
The Indian equity market’s trajectory next week will be influenced by both domestic and global factors. Key areas of focus will include foreign institutional investor (FII) and domestic institutional investor (DII) flows, rupee movement, and crude oil prices. On the data front, the auto companies listed on the domestic bourses will announce their respective sales figures for the month of December 2024 on Wednesday. On the macro front, India’s current account figures will be made public on Tuesday (December 31). On Tuesday (December 31), China’s official NBS Manufacturing PMI will be announced on Tuesday. In the United States, pending home sales figures will be announced on Monday (December 30).
Technical Overview
- Following a substantial decline in the week prior, the Nifty index engaged in efforts to stabilize during the truncated trading week, remaining just below critical resistance levels.
- Over four trading days, the Nifty faced resistance at the 200 DMA and consistently failed to achieve a closing value above this benchmark. The trading range became considerably narrower, as the Nifty oscillated within a limited span of 292 points before concluding the week with a marginal gain of 226 points.
- Notably, volatility diminished relative to the previous week; during a surge of 15.48%, the India VIX experienced a decline of 12.17%, ultimately settling at 13.24.
- As the week concluded, all broader indices continued to remain below their 50 DMA, with Microcaps being a notable exception, as they showed improvements in the negative momentum that had characterized the prior week. Sector-wise, a majority of indices persisted in exhibiting a strained trend, although some enhancement in negative momentum was observed.
- In terms of market breadth, the majority of stocks demonstrated a lack of strength in their intermediate positions, with the percentages of stocks trading above 10 and 20 DMAs significantly falling beneath median levels, accompanied by a negative crossover. Furthermore, the percentages of stocks trading above 50 and 200 DMA dipped below median levels once more, necessitating a cautionary stance.
- Indicators related to momentum market breadth remained on the weaker side, suggesting diminished stock participation, thereby reducing the likelihood of successful trades within this market framework.
- From a technical perspective, the Nifty is situated at a critical juncture. On one hand, it has closed below the resistance level of 200 DMA (23861), as well as the prior gap area near 24150, thereby forging this region into a crucial resistance zone. Conversely, the Nifty holds a position just above the 50 WMA at 23568, which serves as immediate support, followed by a pivotal support level near 23250.
- This situation positions the Nifty within a fragile range of 24150-23250. It is imperative for the Nifty to maintain its standing above the 50WMA; any violation of the support zone may precipitate sustained market weakness and induce an intermediate corrective trend. Furthermore, it is crucial to assert that any prospective technical rebound will only be tenable if the Nifty is able to surpass and close above its 200 DMA. The longer the Nifty remains below this threshold, the more susceptible it becomes to retesting the support zone.
- Consequently, it is prudent to adopt a cautious approach accompanied by effective risk management strategies in the current market context, emphasizing the importance of waiting for conditions to become more favorable.
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