Auto sector is the one to focus on for the traders! Here’s why

resr 5paisa Research Team 28th October 2022 - 09:57 pm
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Nifty Auto has jumped 4% during Diwali week

As the global sentiment remains fragile, it is utmost important for traders to be in line with market’s changing dynamics. Sector rotation is strongly focussed, and timely profit booking is a must for profitable trading in such scenarios. Meanwhile, as we see that the performance baton is being regularly shifted among various sectors, it is important to analyse which sector is outperforming the broader market at given point of time. That being said, the Auto sector has seen fresh buying interest as Nifty Auto becomes one of the top performing sectoral indices this week. Nifty Auto has jumped 4% during the Diwali week as it breaks out form its consolidation pattern. 

Technically, the index had been consolidating for about 20 trading sessions before witnessing a strong breakout. With this, it currently trades near its all-time high level of 13421.60.  Interestingly, it recently registered a multi-year breakout in July, which was followed by a consolidation. Thus, such breakout is considered quite positive. Also, it trades above all its key moving averages and all the moving averages are in an uptrend. The 14-period daily RSI (64.10) is in the bullish territory and indicates strong strength. The MACD line has surged above the zero line and remains bullish. The +DMI is well above -DMI. On the weekly timeframe, the elder impulse system has indicated a fresh buy. The Relative Strength (RS) is above zero and shows relative outperformance against the broader market. The TSI and KST indicators are also in line with these bullish technical parameters. Overall, the sector is likely to outperform given its bullish and is the one that should be in focus for upcoming weeks.

On YTD basis, Nifty Auto has delivered extraordinary returns of over 20% and is one of the top performers among the sectoral indices this year. The Auto companies have declared good earnings despite rising raw material costs and shortage of chips. Also, they expect the robust growth to continue in upcoming quarters. Don’t forget to add auto stocks in your watchlist!


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