Sector rotation playing out in Indian markets - Nifty Auto Index approaching multi-year breakout!

The Indian markets have been topsy turvy on Tuesday as Nifty after registering a low of 18,023.95, has bounced back from the lower levels and attempted to enter into positive terrain. 

Among the sectoral performance, six sectors were seen trading in red, while the remaining five were seen trading in green. 

Interestingly, the Nifty Auto index is leading from the front as on the day when the benchmark indices were seen trading in red, it has outperformed the benchmark indices hands down. Nifty Auto index has gained nearly 3% and a majority of stocks from this sector were seen trading in green with Maruti Suzuki India trading in the top gear as it zoomed over 7% followed by Bharat Forge and Tata Motors.  

Sector rotation has been the key theme for this unprecedented bull run from the March 2020 lows. Every now and then, we see some sectors come to rescue the market and lift the spirits of investors. A similar act is seen been done by the Nifty Auto Index on Tuesday. However, what’s more fascinating is the fact that after a V-shaped recovery seen from the recent lows, the Nifty Auto is now approaching a multi-year breakout.  

Nifty Auto had registered a high of 12,108.80 in the year 2018 which was then followed by almost a similar high of 12,052.35 in the year 2019. Then the Coronavirus pandemic struck and the sector was gripped by not a single but numerous challenges which led to the downfall of the sector. Now, once again it's knocking at the doors of the breakout region. But this time it's very special as in case the breakout materializes, it would be a multi-year breakout. Interestingly, a multi-year breakout witnessed at an all-time high is a very special breakout. Furthermore, the 14-period RSI on the daily time frame has jumped above the 60-mark which is considered bullish and the RSI on the weekly time frame is already in the ‘Super Bullish’ territory.