Amid escalating global market turbulence, Nifty is maintaining its firm stance, thanks to robust breadth, adding immense strength to the wider markets. However, the silver-lining does quite contain shadowy undertones in the form of potential retracement risk, setting the stage for an interesting week ahead.
Looking at the broader landscape, the buoyance steered by strong bouts of liquidity appears to be under potential threats. Furthermore, with international market indices like S&P 500 and Dow Jones making fresh all-time highs simultaneously, the global market situation is volatile adding to its unpredictable nature.
In the broader markets, Nifty advanced nearly half a percent last week, marking some positive development. However, it was not strong enough to erase the retracement risks looming on the horizon. The sixth day of straight gains for the index showed signs of leveling off, hinting at the prevalent volatile conditions.
Despite the short-term bullish momentum in the market, underlying issues continually weigh heavy. Such tensions were evident as Nifty pulled back slightly over 150 points from the 14,653 level. The relentless selling pressure in select stocks and sectors amplified the retracement concerns.
Among the various sectors, information technology and pharma-led, whereas metals and real estate lagged. The banking index remained almost identical when compared with the last week, reflecting the significant sectoral rotation taking place in the market.
In terms of technical analysis, the daily MACD remained bullish and stayed above its Signal Line. A Falling Window occurred on the Candles which may potentially prove to be a resistance area for the market in the future. A crucial resistance is seen at 14500 & 14650 levels for the week while 14000 & 13880 are expected to act as support.
Another point of concern is the instability of the Volatility Index (VIX). A significant rise was noted in the volatility index, which increased by 2.31% to 24.3750. The heightened level of the VIX, known as the ‘fear gauge’ of the market, further accentuates the risk for potential pullbacks.
Contrarily, consistent dollar selling by exporters and banks prevented a steeper fall and thus partially offset the retracement risk. Moreover, the new earnings season’s onset may provide key indicators for future market trends and any extraordinary performances may alleviate short-term retracements.
In conclusion, while the risk of retracement seems to be looming over the Nifty’s head, the robust breadth and continuous inflow of funds lend it some resistance. Furthermore, the sectoral rotation, the beginning of a new earnings season, and the daily MACD remaining above the signal line provide some stability. However, rising volatility along with the heightened VIX adds to the risk of pullbacks. Therefore, remaining cautious and keeping a close eye on the global trends will be pivotal for investors in the upcoming week.