Reliance industries | Is Reliance Inds the reason why the Nifty50 is still consolidating – a statistical analysis

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Mumbai: It was June 15, 2021 when the NIFTY hit the 15,900 mark for the first time. In fact, on April 22nd, 2021, the Nifty50 bottomed near 14150 levels and it took exactly 37 trading sessions for the index to climb 1800 odd points, an average running rate of 50 points per session. That run rate wasn’t bad at all given the levels at which the markets were trading. However, from June 15th to July 9th, almost 18 trading sessions passed, but the NIFTY50 INDEX couldn’t break even 50 points above the 14900 mark.

Suddenly there was a PAUSE button that the markets pushed during this period of extreme consolidation.

The range for the Nifty50 was 200 odd points, with 15700-15900 being the broad short-term range since the last 18 trading sessions of this consolidation. Typically our first assumption would be after some kind of market trend and rally and then consolidation in a band so tight that the markets went into RISK OFF mode a bit. However, the data shows something completely different.

Here’s a little glimpse of the same thing.

Chart 1: Sector performance with regard to Nifty (June 15, 2021 to July 9, 2021)

TABLE 1 ANALYSIS:

In view of chart 1: shows that the REALTY index is the best performing sector in this consolidation. This means that usually one of the highest volatility, high beta sectors will find favor in this market.

Another classic observation was the HUGE underperformance in the ENERGY sector.

A closer look shows that Reliance hit its best 8-month close on June 15, near the 2250 mark. Post that the stock has entered a correction phase. This indicates that the markets are so dependent on RELIANCE INDS that it literally brings market trends to a standstill in between.

In addition, the energy sector rose from the April 22nd level from 17371 on June 15th to 21066, which was apparently the short-term TOP for the entire ENERGY index.

This brings up a very important point here that the markets are heavily reliant on the ENERGY sector to start and RELIANCE INDS is obviously one of the top weight contenders in that. When the energy gets its energy back, the markets can also radiate their energy well.

TABLE 2: ANALYSIS

The analysis in Table 2 shows that the energy sector is weak within the sector. A closer look reveals that while RELIANCE INDS is not the worst performer in the sector, with such a high weighting that the stock dominates in this sector, it certainly leaves a dent in the performance of the entire sector.

RELIANCE INDS stocks saw a sharp decline in RELATIVE strength and that was the main reason the ENERGY sector underperformed as well as its heavy impact on the Nifty50.

CONCLUSION:

Two important observations that emerge from this consolidation are therefore:

1. The real estate index is the new TADKA of the market as it has developed relatively as one of the sectors with the better performance in this 18 trading day consolidation.

2. Nifty50 has lost energy in precisely this time frame due to the enormous underperformance of the ENERGY index and in particular due to the underperformance of Reliance Inds.

Understanding these two pointers is extremely important as they can help a short term trader keep track of current trends and stay ahead of the competition.

source https://thedailytradingnews.com/reliance-industries-is-reliance-inds-the-reason-why-the-nifty50-is-still-consolidating-a-statistical-analysis/