An analysis on NSE sectors' relative strength to broader market
As NIFTY is choosing to make new highs this week, I look at different sector performances and their strength against the broader market.
Through sector analysis and relative strength comparison we can find sector booms before they happen.
Also note, the comparisons made below are all relative to CNX500 index, so it doesn't mean that if trend is downwards the sector is going down. It just means that if you choose to invest in the top 500 companies vs sectoral index, what would give you a better return. If nifty decides to go down it will pull the whole market down, sectors in uptrend have a better chance of survival, that's all. There can be individual stocks (that may or may not contribute to sectoral index) which will do better than overall market. Good thing is you can apply similar analysis to individual stocks and compare them against their sectors and broader market to achieve superior returns (relative to market).
Whenever I am using terms like bullish/bearish/momentum etc., the context is always relative to CNX500
I am looking at the charts at a weekly level here, however the same analysis can be used at a daily level to ascertain sector strength in short term.
(Short Term - a few weeks/months
Mid term - 6-18 months
Long term - 2 years+)
I do not think any TF smaller than daily would make sense here, *but my relative strength to tradingview awesome trader index is pretty low*, so please feel free to correct me if I am wrong. Your feedback and critique (about my analysis not my appearance) will always be received positively as it helps me grow and learn from those who are better than me.
Now let us get on with the analysis -
1. BANKNIFTY - A favorite of many people for intraday, short term movements. See the chart below -
It seems to be making a flag and pole kind of structure here but current strength trend is downwards so I am looking for opportunities elsewhere in short term. However, this can turn into a boomer soon, so keep an eye on the structure here.
2. CNXAUTO - Auto was not doing well before the pandemic. However, it seems like strength is coming back in the sector. See the chart below -
It is making a structure of HH-HL and is currently touching the support trendline. That means in the short to mid term we may find good opportunities here.
3. CNXENERGY - Energy index is making LH-LL structure relative to CNX500 but there is divergence in the RSI. See the chart below -
As it is touching the support trendline it may bounce and touch the channel line in short term. Some good opportunities can be found there.
4. CNXFMCG - This sector has the potential to give superior returns relative to the market in short to mid term. It was trending lower but has recently seem to have found a bottom and is not ready to trend up again. See the chart below -
There is bullish divergence in RSI as well. Stocks from this sector have started to pick up this week.
5. CNXINFRA - This sector also looks to be on the verge of a relative breakout. As can be seen in the chart below there is a consolidation triangle pattern forming currently. Keep an eye on this chart on a daily/weekly TF
6. CNXIT - IT is all time favorite in the stock market. The relative strength trend was in a consolidation pattern and looks to be on the verge of breakout from the upper resistance now. RSI was in divergence before but that ship seems to have sailed. There can be good opportunities found here in the short term at least.
7. CNXMEDIA - Seems to be in perpetual down move since last 2-3 years. RSI seems to be in divergence so a structural change is possible. Nothing interesting here for now.
8. CNXMETAL - Metal has been making headlines during past weeks. See in the chart below that it is forming a beautiful cup and handle kind of pattern relative to CNX500. It looks like it was rejected by resistance during last week but that may change. So keep an eye on the structure if it goes above that resistance trendline than even better days are coming for metal.
9. CNXMNC - MNC index is trading in a broadening pattern relative to CNX500 and just seems to have bounced off the support trendine. To me it indicates increasing momentum in the stocks from this sector in the short to mid term. See chart below -
10. CNXPHARMA - Pharma is a defensive sector. Money is moved in the defensive sectors when overall market is likely to go down or experience heavy volatility. Usually an increasing momentum in pharma stocks would indicate money moving to safer options. Right now it is forming a consolidation triangle pattern. Keep an eye out for any moves on the chart below -
11. CNXPSE - PSE stocks look hot. After a major downward trend there is finally HH-HL structure forming. I expect good bullish moves on these stocks in the short to mid term. See the chart -
12. CNXPSUBANK - PSU bank long term trend is downward however in the short term there can be a move upwards. I, in general, do not like to invest in Public sector banking stocks but there can be good potential in the short term. Just we wary of the overall trend and keep an eye on the chart below -
13. CNXREALTY - Like PSU, Realty has also been making LL-LH structure however the angle of descent seems to have flattened slightly. That's first indication of trend shift. Also there is RSI divergence in recent lows. The trend also seems to be on a verge of breakout from the channel. See chart below -
14. CNXSERVICE - The service sector has done well against nifty during last 2 decades. One can look out for good long term opportunities during market down months and hold such stocks for long term. These kind of stocks in the portfolio can maintain a health even everything seems to be catching fire around you. See the chart-
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Please like and follow this idea if it was a valuable read for you.
Thank you
Through sector analysis and relative strength comparison we can find sector booms before they happen.
Also note, the comparisons made below are all relative to CNX500 index, so it doesn't mean that if trend is downwards the sector is going down. It just means that if you choose to invest in the top 500 companies vs sectoral index, what would give you a better return. If nifty decides to go down it will pull the whole market down, sectors in uptrend have a better chance of survival, that's all. There can be individual stocks (that may or may not contribute to sectoral index) which will do better than overall market. Good thing is you can apply similar analysis to individual stocks and compare them against their sectors and broader market to achieve superior returns (relative to market).
Whenever I am using terms like bullish/bearish/momentum etc., the context is always relative to CNX500
I am looking at the charts at a weekly level here, however the same analysis can be used at a daily level to ascertain sector strength in short term.
(Short Term - a few weeks/months
Mid term - 6-18 months
Long term - 2 years+)
I do not think any TF smaller than daily would make sense here, *but my relative strength to tradingview awesome trader index is pretty low*, so please feel free to correct me if I am wrong. Your feedback and critique (about my analysis not my appearance) will always be received positively as it helps me grow and learn from those who are better than me.
Now let us get on with the analysis -
1. BANKNIFTY - A favorite of many people for intraday, short term movements. See the chart below -
It seems to be making a flag and pole kind of structure here but current strength trend is downwards so I am looking for opportunities elsewhere in short term. However, this can turn into a boomer soon, so keep an eye on the structure here.
2. CNXAUTO - Auto was not doing well before the pandemic. However, it seems like strength is coming back in the sector. See the chart below -
It is making a structure of HH-HL and is currently touching the support trendline. That means in the short to mid term we may find good opportunities here.
3. CNXENERGY - Energy index is making LH-LL structure relative to CNX500 but there is divergence in the RSI. See the chart below -
As it is touching the support trendline it may bounce and touch the channel line in short term. Some good opportunities can be found there.
4. CNXFMCG - This sector has the potential to give superior returns relative to the market in short to mid term. It was trending lower but has recently seem to have found a bottom and is not ready to trend up again. See the chart below -
There is bullish divergence in RSI as well. Stocks from this sector have started to pick up this week.
5. CNXINFRA - This sector also looks to be on the verge of a relative breakout. As can be seen in the chart below there is a consolidation triangle pattern forming currently. Keep an eye on this chart on a daily/weekly TF
6. CNXIT - IT is all time favorite in the stock market. The relative strength trend was in a consolidation pattern and looks to be on the verge of breakout from the upper resistance now. RSI was in divergence before but that ship seems to have sailed. There can be good opportunities found here in the short term at least.
7. CNXMEDIA - Seems to be in perpetual down move since last 2-3 years. RSI seems to be in divergence so a structural change is possible. Nothing interesting here for now.
8. CNXMETAL - Metal has been making headlines during past weeks. See in the chart below that it is forming a beautiful cup and handle kind of pattern relative to CNX500. It looks like it was rejected by resistance during last week but that may change. So keep an eye on the structure if it goes above that resistance trendline than even better days are coming for metal.
9. CNXMNC - MNC index is trading in a broadening pattern relative to CNX500 and just seems to have bounced off the support trendine. To me it indicates increasing momentum in the stocks from this sector in the short to mid term. See chart below -
10. CNXPHARMA - Pharma is a defensive sector. Money is moved in the defensive sectors when overall market is likely to go down or experience heavy volatility. Usually an increasing momentum in pharma stocks would indicate money moving to safer options. Right now it is forming a consolidation triangle pattern. Keep an eye out for any moves on the chart below -
11. CNXPSE - PSE stocks look hot. After a major downward trend there is finally HH-HL structure forming. I expect good bullish moves on these stocks in the short to mid term. See the chart -
12. CNXPSUBANK - PSU bank long term trend is downward however in the short term there can be a move upwards. I, in general, do not like to invest in Public sector banking stocks but there can be good potential in the short term. Just we wary of the overall trend and keep an eye on the chart below -
13. CNXREALTY - Like PSU, Realty has also been making LL-LH structure however the angle of descent seems to have flattened slightly. That's first indication of trend shift. Also there is RSI divergence in recent lows. The trend also seems to be on a verge of breakout from the channel. See chart below -
14. CNXSERVICE - The service sector has done well against nifty during last 2 decades. One can look out for good long term opportunities during market down months and hold such stocks for long term. These kind of stocks in the portfolio can maintain a health even everything seems to be catching fire around you. See the chart-
...
...
...
...
Please like and follow this idea if it was a valuable read for you.
Thank you
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