Whipsaw moves in market likely in near term; Nifty Auto/Nifty50 ratio heading towards 2019-peak

Post previous week's low of 12,790, there is no looking back at Nifty's direction. It edged higher this truncated week as retracement moves were once again short-lived. The benchmark index escalated further into unexplored zone yet again, thereby witnessing another record high of 13,280.

Broad-based participation on Dalal Street and comeback of stocks/sectors that have been major underperformers for most part of 2020 aided this week's rally. Index is approaching three-digit Gann number of 133(00), move above the same would result in shift of orbit on the upside as continuous sectoral churning dominates the market.

Our customized Equal Weighted Nifty Top 10 index includes top 10 constituents of the benchmark Nifty, which contributes to over 60 percent weightage in Nifty. Post a massive rally, it is essential to re-visit the leadership stocks. One common trait visible in our customized index is that rallies are followed by period of consolidation since May 2020 (which ideally results into sector/stock churning).

Moreover, such time-wise corrective move has resulted in a move back to its 50-EMA. Currently, disparity is seen between the current price and moving average. Such deviation tends to catch-up. So, whipsaw moves are likely in near term. Meanwhile, for Nifty midpoint of current three-digit Gann channel (i.e. 13,000) would act as an immediate support. Our customized Nifty breadth bounced back from neutral terrain to 86 percent. Such short-lived correction in breadth are common trait in a bullish market.