For the large part of the week gone by, Nifty 50 mainly consolidated in the 19350 to 19500 range. On Friday it made a strong 150 points up move and closed at an all time high of 19564. Nifty 50 is a free float market capitalization-based index and therefore, weightage of component companies/sectors keep changing by a small value depending on the performance of individual stocks. It was found in a recent (Jul 13th) estimate that Financials contribute 37.59%, IT contributes 12.65% and Energy contributes 11.99% to Nifty’s performance. Other sectors like FMCG, pharma etc contribute well below 10% each. Keeping this in mind, we set out to analyze the performance of those 3 sectors.
Bank Nifty, Daily Chart, Tradingview.
Please refer our discussion last week. For Bank nifty, 45730 is intact as a resistance and although we talked about Bank nifty possibly correcting to 44200 level, it has taken text book style support at 20 DMA. As long as 20 DMA holds, it will work in favour of Nifty reaching higher levels. We very often underestimate 20 DMA, which is also the middle line of Bollinger band. In case bank nifty breaches 20 DMA, Nifty’s movement to intermediate target of 19750 and 19900 will be compromised unless other 2 sectors – IT and Energy come to its rescue.
Nifty IT, Daily Chart, Tradingview
Please refer our discussion last week. For Bank nifty, 45730 is intact as a resistance and although we talked about Bank nifty possibly correcting to 44200 level, it has taken text book style support at 20 DMA. As long as 20 DMA holds, it will work in favour of Nifty reaching higher levels. We very often underestimate 20 DMA, which is also the middle line of Bollinger band. In case bank nifty breaches 20 DMA, Nifty’s movement to intermediate target of 19750 and 19900 will be compromised unless other 2 sectors – IT and Energy come to its rescue.
Nifty IT, Daily Chart, Tradingview
Nifty IT is in a precarious condition. Very clearly it completed a year long correction and consolidation and made a very clear base of 26185. The up move is evident and it rose 1100 points on Friday. In last one year, this index never made such a big single day move. The big daddy of Nifty IT, TCS made a 5.2% surge on Friday. Infy, Wipro, HCL tech, Tech M – all large cap and midcap IT stocks made a very healthy upove after a long time. Not to forget, HDFC has been replaced by Mindtree and therefore heft of IT in Nifty has increased albeit by small quantity. Now, all is not well. Although the above chart makes it very promising that IT is ready for a takeoff, on the way up there is a zone of congestion from 31225 to 31587. If and once that is taken off, Nifty IT will handsomely compensate for any lackluster performance of Bank Nifty.
Nifty Energy, Daily Chart, Tradingview.
Surprisingly, Nifty Energy also completed its year-long correction almost same time (May, 2023) as Nifty IT did. It is in a beautiful copy book rising channel. There is no immediate resistance. On the way up 26200 to 26350 will act as a zone of resistance but that is some distance away. As we described earlier, this group of stocks are connected to commodity market (oil, gas and coal) and has a different dynamics than other Nifty constituents. In fact there is a major anomaly here. RIL is the torch bearer of Nifty energy (as well as Nifty 50) but its revenue from retail, telecom and other smaller verticals make it very complicated to cast in a sector. Reliance is possibly fundamental analyst’s night mare considering the maze of activities. Coming back to our technical, all three sectoral charts above indicate that any weakness in bank nifty will be compensated by IT and energy unless there is a major shift in global geopolitics. After all we are in a very uncertain time.
Nifty 50, Daily Chart, Tradingview
In our view Nifty made a very decisive move on Friday and trying to unshackle itself from the 19450 hick up. As we postulated in our last week end discussion, it still has enough room to go till 19750 first and then 19900 in the current 5th wave of the Elliott wave projection. Nifty IT’s resurgence has made that hope stronger.
A quick round up of international scenario. In continuation of our last week’s discussion, Dow Jones Industrial average is still struggling to go past 34600, while S&P 500 and NASDAQ 100 are nicely chugging along (chart not attached here). Both of them gave 2 stunning gap ups in the week and are looking pretty strong. However, unlike Nifty 50, both of them are quite at a distance from all time high.
Now, looking at the other major influencer i.e. European market we get a completely different view. You may remember in one of our earlier posts, we clearly showed that in spite of Ukraine war and energy crisis, all major European economies and Russia made considerable gain in the respective stock market and the only looser was Ukraine, whose stock market is closed. However for last one month or so the two most important European economies, namely France and Germany are struggling. It is very clearly seen in the charts below that both CAC 40 (France) and DAX (Ger) have fallen from the uprising channel and is faltering.
CAC 40, Daily Chart, Tradingview.
DAX, Daily Chart, Tradingview.
Therefor we can sum up the week gone by with the following points.
- Nifty 50 is on the cusp of another up move.
- Bank nifty is behaving iffy but two other sectors are ready to compensate and they are Nifty IT and Nifty Energy.
- US market (S&P 500) is chugging along smoothly. While technology stocks are making good up move, very high market cap narrow index DJI is struggling.
- European markets completed a round of bull run in Jun and for last one month both German and French indices indicate struggle. High inflation and related monetary and fiscal complication could be a reason. However, that is beyond the scope of technical analysis.
