Moneycontrol Pro Market Outlook | Markets brace for more volatility ahead

New business data points to the fact that Dear Reader,

Indian equity markets extended their losing streak to seven consecutive weeks in the week ended September 25, marking the longest such run since May 2020. The Nifty 50 eased 205.9 points, or 0.88 percent, to close at 23140.5.

Broader markets were additionally down as Nifty Smallcap 100 eased 0.8 percent while the Nifty Midcap 100 declined 2 percent during the week. The total market capitalisation of BSE-listed firms shrank by more than Rs 2 lakh crore.

FPIs continued their selling spree for a fifth straight week, offloading Rs 11,490.03 crore in equities during the period and bringing total outflows for the month to Rs 18,530.97 crore.

During the week, India's near-term volatility gauge, the Nifty India VIX, jumped 6.9 percent for the week.

Oil was at the centre of the problem. Brent crude rebounded above $107 a barrel after briefly dipping below $100 earlier in the week. Brent has now advanced more than 18 percent during the past month and over 37 percent during the past three months.

Another factor that further noted to the market was the rising bond market. US Treasury yields rallied to multi-year highs, with the 10-year note touching above 5.2 percent on Thursday and the 30-year climbing past 5.5 percent, its highest level since 2004.

Sector wise, Nifty IT led the slide, falling 2.4 percent, Nifty Financial Services declined 1.6 percent, and Nifty Energy additionally eased nearly 1 percent. On the other side, Nifty Realty topped the gainers with a 3 percent climb, while Nifty Consumer Durables, Nifty Pharma and Nifty FMCG each advanced around 1 percent.

Despite rising bond yields, the S&P 500 shrugged off inflation worries and rising rates.

Looking ahead, market sentiment over the upcoming week will likely stay sensitive to oil price movements, with developments in US-Iran talks anticipated to influence direction.

On the weekly timeframe, the Nifty closed at 23,140.50, down 0.88 percent for the week. The index has broken down from the rising wedge pattern marked in red and is now approaching the softer yellow trendline, which has historically acted as firm backing. Prices keep trade below the 40-week EMA, suggesting bearishness in the overall trend.

Additionally, the RMI indicator has shown a bearish crossover, reinforced the bearish bias and suggested continued softness in the near term.

The FII Net Index Futures Position indicator has touched a new extreme low, at present at -31,20,001, marking an all-time low for FII selling positions. This suggests that FIIs are extremely bearish on the market. That stated, such extreme positioning can additionally serve as a contrarian signal, and if the market starts to recover, a short-covering move by FIIs could follow, potentially supporting a broader market rebound.

Another important diffusion indicator, the percentage of Nifty 50 stocks trading above the 20-SMA, is showing a positive divergence. While the Nifty 50 has formed a softer low, the diffusion indicator has formed a elevated low, suggesting improved market breadth and stronger underlying participation.

Lastly, the New 1-Month Highs indicator for the Nifty 50 stays in negative territory, though the negative reading has narrowed as it moves toward the positive zone. In the meantime, the Nifty 50 keeps form softer lows. This positive divergence suggests that overall market breadth is improving, although that improvement has not yet been reflected in the index price.

Nifty 50 – The Benchmark Index ended softer by -0.88 % the current week, closing at 23,140.50.

Weekly RRG:

Leading Quadrant:

Nifty IT, Nifty Auto, and Nifty Consumer Durables keep stay in the leading quadrant. That stated, some reduction in momentum is evident in the Nifty Consumer Durables and Nifty IT indices. Nifty Auto is showing stable momentum and an improvement in relative performance. An interesting development is Nifty Media, which entered the leading quadrant the current week, with improved momentum, indicating potential for further upside in relative performance. Weakening Quadrant:

Nifty Metals keeps show firm momentum improvement and is now close to entering the leading quadrant. If this momentum continues, further improvement in relative performance could be noted. Nifty Private Bank, Nifty Bank, and Nifty Financial Services keep show softness, with reduced momentum. Nifty Financial Services is particularly close to moving into the lagging quadrant. Nifty Realty, which entered the weakening quadrant last week, keeps witness a slowdown in momentum, suggesting further moderation in relative performance. In the meantime, Nifty Pharma and Nifty MNC are showing improved momentum, suggesting a possible recovery in relative resilience. Improving Quadrant:

Nifty Oil & Gas and Nifty PSU Banks keep show firm momentum improvement. Among them, Nifty PSU Banks is showing particularly firm momentum and relative performance. If this positive momentum sustains, the index could move toward the leading quadrant, indicating further improvement in relative resilience. Lagging Quadrant:

Nifty Energy, Nifty Infrastructure, Nifty FMCG, and Nifty PSE keep stay in the lagging quadrant. That stated, Nifty Energy is showing a sharp improvement in momentum, while the other sectors are additionally witnessing some improvement. Despite this, all four sectors keep stay in the lagging quadrant, indicating continued softness in relative performance.

Among the stocks anticipated to perform better during the week are Zydus Lab, Divi’s Lab, Aurobindo Pharma, Apollo Hospital, SonaComs, Laurus Labs, and RBL Bank.