• : June 20, 2021
  • : B. Krishnakumar
 
Overview of NSE Sectoral Indices
 
This week, let us take a quick look at how the sectoral indices stack up versus the Nifty 50 index. Let us get started with the newly introduced feature in TradePoint web which is called as the MTF Ultimate Matrix Ranking. You can access this feature from the Matrix menu in the web version. This table calculates the Ultimate Matrix based on three different box sizes are time frames.



From the above table, it is apparent that the Media, IT, Consumption, MNC and FMCG sectors are the top performers. The ones at the bottom of the table are underperformers. The list includes Metal, Auto and PSU/ Pvt banks.

If there is a bearish trend in Nifty 50 Index next week, focus on the weak sectors to identify shorting opportunities. If the trend is bullish for Nifty 50 index next week, it would make sense to focus on buying opportunities in the outperforming sectors.

You must of course have a look at the relative performance of these sectors versus the Nifty 50 index too. The Sector Matrix feature in the TradePoint software will be useful in this regard. Focus on the common outperforming and underperforming candidates from the Ultimate Matrix and Sector Matrix and focus on them based on the trend in the Nifty 50 index.

Let us take a closer look at the metals sector that has been a star performer until the beginning of this month.

Have a look at the P&F chart of the Nifty Metal index in the 0.25% box size.



If you notice, the price is interesting poised. There is a potential bullish ABC pattern which will be confirmed if there is a breakout above the down sloping 45-degree trend line. The price is on the verge of closing below the moving average and a bearish bull-trap pattern is completed. It remains to be seen if the price would reverse and trigger a bullish ABC breakout or slide below the moving average indicating short bearishness.

Let us also look at the relative performance of this index versus Nifty 50.



Here again, there are interesting but divergent aspects. The RS chart has dropped below the moving average and the set up is bearish, indicating short term underperformance of Metals. There is however a bullish ABC possibility here too. And as of now, the price is still confined within the bullish anchor column. Hence, we need to wait for more clarity about the nature and sustenance of the recent weakness and underperformance.

What is interesting is the PMOX indicator in the above RS chart. There is a green dot printed at oversold levels suggesting that the undertone is still bullish and indicates the chances of trend continuation in the RS chart. In essence the PMOX indicator is suggesting the possibility of the metal index bouncing back. But, as always, keep an eye on the overall price structure and the risk-reward equation before taking any decision.

Metal sector is at crossroads and the price action in the upcoming days / weeks would offer more clarity about what is in store for this sector. The confusion now is whether the recent weakness in the metals sector is just a pull back within an uptrend or if this would develop into a much deeper correction.