Key Takeaways
- Weekly Nifty up ~2% (373 points) but volatility remains elevated.
- India‑US trade pact sparked a gap‑up; budget nerves created early‑week swings.
- Immediate resistance at 26,000‑26,300; support clusters at 25,400 and 24,850.
- Momentum indicators (RSI 53, MACD narrowing) point to neutral‑to‑positive bias.
- Financials, IT and banks lead the Relative Rotation Graph; mid‑caps, autos and infra lag.
- Smart‑money play: selective stock‑picks, tight stops, avoid aggressive index bets.
Hook
You missed the budget‑induced turbulence, and now the Nifty’s rally could be a mirage.
Why Nifty’s 2% Weekly Gain Still Signals Caution
The index closed the six‑day week with a 373‑point gain, but the intra‑week range stretched a massive 1,662 points. That swing‑room reflects a market still digesting two heavyweight events: the Union Budget and the India‑US trade agreement. While the latter injected optimism and a gap‑up, the former left a lingering “what‑if” that keeps traders on edge.
From a technical standpoint, Nifty remains above its 50‑week and 100‑week moving averages, a classic sign of a long‑term uptrend. However, the price is flirting with the upper edge of a rising channel, a classic supply zone where sellers tend to re‑assert themselves. A decisive break above the 26,300 ceiling would be needed to confirm the next leg; a slip below 25,400 could open a deeper correction toward 24,850, a level that also aligns with the 200‑day moving average.
Sector Rotation: Winners and Losers in the Current Cycle
Relative Rotation Graphs (RRG) reveal a clear split. Financial Services, IT, Bank Nifty and the broader Services sector sit firmly in the “leading” quadrant, indicating they are outperforming the Nifty‑500 benchmark. This mirrors the macro‑economic narrative: a stronger rupee and better trade terms boost credit growth and tech export demand.
Conversely, Mid‑Cap 100, Auto and Infrastructure indices have slipped into the “weakening” quadrant. The mid‑cap slowdown aligns with higher valuation concerns and the lingering budget uncertainty that disproportionately affects smaller‑cap balance sheets. Energy and Media have moved into the “improving” quadrant, hinting at a potential re‑rating as oil prices stabilize and advertising spend recovers.
History repeats itself: after a major fiscal announcement, the market typically rewards sectors with direct policy tailwinds (banks, IT) while cyclicals (auto, infrastructure) lag until the fiscal outlook clarifies.
Technical Landscape: Support, Resistance and Momentum Indicators
The weekly Relative Strength Index (RSI) sits at 53, comfortably inside the neutral band (30‑70). It suggests no overbought or oversold condition, but also signals that bullish momentum is not yet roaring.
The Moving Average Convergence Divergence (MACD) remains below its signal line, yet the histogram is narrowing. A shrinking histogram often precedes a bullish crossover, implying that downside pressure is waning.
On the candlestick front, the week produced a long‑range candle with a small real body near the high end, a classic “spinning top” pattern that signals indecision. The price closed above the falling trendline support, preserving the longer‑term uptrend.
For those unfamiliar, the RSI measures the speed and change of price movements; values above 70 suggest overbought conditions, while below 30 indicate oversold. The MACD tracks the relationship between two exponential moving averages (typically 12‑day and 26‑day) to spot trend shifts.
Key price levels to watch:
- Resistance: 26,000 (psychological round), 26,300 (upper channel).
- Support: 25,400 (first major floor), 24,850 (200‑day MA).
Investor Playbook: Bull vs Bear Scenarios
Bull case: A clean break above 26,300 accompanied by a MACD bullish crossover would validate the upside momentum. In that environment, consider adding exposure to the leading sectors—Financials, IT and Bank Nifty—through ETFs or high‑quality stocks. Use a trailing stop of 150‑200 points to lock in gains as the rally extends.
Bear case: A close below 25,400, especially if the RSI drops toward 40, would signal a swing back to the “weakening” quadrant. Defensive positioning becomes prudent: shift to high‑yield PSU bonds, gold, or defensive consumer staples. Tighten stops at 24,850 to limit downside.
Position sizing should follow the 1‑2% rule: risk no more than 1‑2% of your portfolio on any single trade. In a volatile environment, this often translates to smaller position sizes than you might deploy in a calm market.
Regardless of the direction, the consensus is to avoid aggressive, un‑leveraged index futures until the breakout or breakdown is clear. Instead, hunt for stock‑specific catalysts—earnings upgrades, sector‑specific policy announcements—that can deliver upside independent of the broader index.
Risk Management and Outlook for the Coming Week
The market is likely to open on a positive note, given the after‑effects of the trade deal. However, the volatility index (India VIX) fell 12% last week, suggesting that the extreme fear factor has receded, but not vanished. Keep an eye on global cues—US Fed statements, oil price swings—as they can quickly reignite intra‑day swings.
In summary, the Nifty’s weekly performance is a study in contrast: solid gains layered over a high‑volatility canvas. Smart investors will respect the technical supply zone, align with sector leaders, and preserve capital through disciplined stop‑losses.
Stay alert, stay selective, and let the data—not the noise—guide your next trade.