Rotation Within Financials Ahead?

Here's the chart of the Equal-Weighted Nifty Financial Services Index versus the Cap-Weighted version. Prices have been in a steady downtrend for most of the last year, however, prices are back at their February lows as momentum diverges positively.

Click on chart to enlarge view.

So the question remains, will we see rotation into some of the Small and Mid-Cap Financial Services stocks whose declines have accelerated over the last few months? Or is this simply another leg lower?

The jury is still out, so we've been focusing on the "non-bank" Financial Services components that are showing relative strength.

But besides offering new potential trading opportunities, the direction of this sector (which makes up 33% of the Nifty 500) will have huge implications for the broader market.

Since January 2018 we've been writing about the weakening breadth in India and how much of the weight was being pulled solely by Financials.

Recently, bank stocks have succumbed to selling pressure...exacerbating the declines in the major indexes. Market bulls want to see this ratio rotate higher and indicate improving breadth within the Financial Services sector.

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Thanks for reading and please let us know if you have any questions.

Allstarcharts Team