By Anand James
FIIs continue to boost their Index Long Futures with the present proportion of longs seen at 47.4. This is the highest this ratio has reached since the early part of December 2024. Post this, the Nifty had a multiple-leg down. Incidentally, thanks to the steady rise through April, it is in fact the peak made during the same period of December that Nifty has set its eyes on. But the week gone by has not been easy, with volatility stepping up and raising concerns as to whether the broader market is prepared to push ahead or if there is reluctance.
Cues from Broader Market
Since April 23, VIX has been rising steadily, with Friday seeing a close of 18.2. Incidentally, VIX had opened at 13.7 on April 7 before the gap-down event unfolded on tariff fears. But at the stock level, volatility, while present, did not seem elevated, at least in comparison with last week. In fact, only 15.6% of Smallcap 250 Index constituents had a volatility of at least 10% this week, while 26.8% of the small-cap stocks had such volatility. With Nifty eyeing the peaks seen 19 weeks ago, 16% of the NSE 500 stocks have already gone past the same. Nifty 50 had 32% of the constituents clearing this benchmark, suggesting that the broader market is taking its time.
Meanwhile, according to Bloomberg, Buffet Indicator, which compares the total US stock market value to the country’s GDP, has dropped to its lowest level since early September. This decline comes despite a recent surge in stock prices, suggesting that equities may still be undervalued and could have further room to rise. Incidentally, both Dow and Nifty 50 are similarly positioned with respect to their all-time highs, suggesting that if their positive correlation is back, they could both as well be rallying together.
Sectoral Cues: Media to entertain, CPSE may lose ground
The Nifty Media Index declined for the second consecutive week, retracing close to the 50% Fibonacci level of last month’s high and low. Towards the end of the week, it formed a Dragonfly Doji, and the MACD crossed above the signal line on the hourly chart, hinting at a potential reversal soon. Stocks such as Sun TV, ZEEL, PVR Inox, and Tips Industries, which together constitute around 62% of the Media Index, appear to be gearing up for a reversal and are expected to drive the index higher in the coming week.
The Nifty CPSE Index has been trading within a tight range over the past two weeks and has formed a pattern resembling a Tweezer Top on the weekly chart. Additionally, the MACD has crossed below the signal line on the daily chart, indicating potential further weakness before the index gains momentum to move higher. Key constituents such as ONGC, NHPC, BEL, Coal India, and Oil India have formed reversal patterns, suggesting they may lead the index lower in the coming week.
Nifty Outlook
Standard deviation studies are indeed pointing to 25,000 and more. Friday appeared more volatile because the strong upmove early in the day, which saw a new 7-day high, failed to sustain in the face of rejection trades. But as it turns out, the ending near 24,350 was eerily similar to that of each of the six previous days. This allows us to retain upside expectations for Monday’s start. That said, any sign of slipping below 24,280 could be taken as an indication towards weakness, though it might require a confirmation from a break below 23,850, to play a 23,670-23,460 move. The odds of the same appear low at this point, though, but we remain cautious.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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