The stocks surged last week, a respite from the stress of the Indo-Pak conflict and the tariff battle. The index took a break last week after rising more than 12% from its low on April 7. The Nifty ended well above the previous decline’s retracement level of 61.8%. Seventy-five percent of the losses were eliminated. Strong purchasing demand is shown by the biggest volume following June 4th. The DIIs are still purchasing more stocks, while the FIIs have returned to their active buying. The market was able to rise over the main barrier with the help of this institutional action.

On Monday, the NSE Nifty had a strong start to the week with a 3.82 percent gain. The index saw another significant increase of 395 points on Thursday after two days of inside Harami activity. Sebi, the market watchdog, was suspicious of these aggressive actions and initiated an investigation to see if any manipulation had taken place. Technically, the index closed with volume support above the previous major high. Only 1,257 points, or 4.79 percent, separate it from the peak.

The Nifty rose 3,372 points, or 15.51 percent, from its low on April 7th during the previous six weeks. In a down market, abrupt rebounds are common. Nonetheless, it is preferable to have a bullish bias as long as the Nifty remains above the 24,033-point 50-week average. The first indication of weakening will be a closure below the low from the previous week.

The favorable trend can continue if the market observes a perfect sector rotation and more involvement from the larger market. The 25,307–350 zone can serve as resistance in the short run. Near the resistance level, the Nifty can begin another wave of consolidation. The 24,700–500 range will serve as a solid support on the downside. At 24,394 points, the 20 DMA may not be broken by the impending consolidation.

The range of the Weekly RSI moved into the zone of strong bulls. It has significant medium-term positive ramifications. Despite a gain of more than 8% over this time, the daily RSI has been flat and bouncing about 60 for the last four weeks. This is an additional explanation for the anticipated consolidation. The ADX line started to rise, which is a sign that the trend is becoming stronger. There is no indication of divergence over any period of time.

Within three months, the five months of correction had regained 75%. The index will remain in an upward trend for at least the next year if it sets a new high each month. Corrections and consolidations may occur.

The trend is unquestionably upward until there is a lower low. The PSE and CPSE indexes both increased by more than 7.2% last week, while the Nifty India Defence sector index was the biggest gainer at 17.21%. This indicates a resurgence of purchasing interest in these industries. Both the momentum and the relative strength are quite powerful.

The indexes for the FMCG, consumption, and infrastructure sectors are in the top quadrant and might do better than the overall market. Bank Nifty, FinNifty, and commodities are all losing ground. With more momentum, the Energy and Midcap-100 indexes moved into the improving quadrant, and these industries could start to outperform.

(The author is a financial writer, technical analyst, trainer, chief mentor at the Indus School of Technical Analysis, partner at Wealocity Analytics, and a research analyst registered with Sebi.)