Relative Rotation Graph (RRG)
Track sector rotation and relative strength for Nifty
The Four Quadrants
Each quadrant tells you a sector's current phase. The direction of its tail tells you where it's heading next.
Improving
Early EntryRS-Ratio below 100, Momentum above 100. Sector is still underperforming but momentum has turned positive. The early recovery phase where institutional investors start building positions before the crowd notices.
Leading
OverweightRS-Ratio above 100, Momentum above 100. Sector is outperforming with accelerating momentum. The strongest quadrant. Hold until the tail starts curving downward toward Weakening.
Lagging
AvoidRS-Ratio below 100, Momentum below 100. Sector is underperforming and getting worse. The weakest quadrant. Wait for momentum to cross above 100 before re-entry.
Weakening
ReduceRS-Ratio above 100, Momentum below 100. Still outperforming but momentum is fading. The early warning. Start reducing exposure before the full rotation into Lagging.
The Clockwise Rotation Cycle
Sectors rotate clockwise through the four quadrants as institutional money flows in and out. Each transition is an actionable signal.
Key Transition Signals to Watch
The most actionable moments on the RRG are when a sector crosses from one quadrant to another. These transitions signal a shift in relative momentum.
Momentum crosses above 100 while RS-Ratio is still below 100. The sector is still underperforming but the tide is turning. Highest alpha potential, highest risk. Institutional early movers enter here.
RS-Ratio crosses above 100 with positive momentum. The sector is now confirmed outperforming. Most systematic rotation strategies enter here. Lower risk than Improving entry, but less alpha.
Momentum drops below 100 while RS-Ratio stays above. Still outperforming but losing steam. Time to tighten stops, trim positions, or start rotating capital to Improving sectors.
RS-Ratio drops below 100 with negative momentum. Full rotation complete. Sector is now underperforming and deteriorating. Exit remaining positions. Wait for the cycle to restart.
The Hook Pattern: The Signal Institutional Traders Watch
A sector's tail curves from Weakening back toward Leading without entering the Lagging quadrant. The outperformance survived a momentum dip. The sector briefly lost steam but regained it before the relative uptrend reversed. This is considered one of the highest-probability continuation signals in RRG analysis.
Set the tail length to 8-10 data points so you can see the full arc of movement. Use the playback to watch a sector enter Weakening, slow down, and then curve back up toward Leading. The longer the tail stays in Weakening before hooking back, the stronger the signal. Pharma and Healthcare often show this pattern during brief consolidation phases within a longer outperformance cycle.
RRG vs Other Indicators
RRG vs RSI
RSI measures if a single stock is overbought/oversold in absolute terms. RRGmeasures how it's performing RELATIVE to a benchmark. Use RSI for timing entries. Use RRG for selecting which sectors to focus on.
RRG vs Sector Heatmap
Kalpi's Sectors page shows absolute returns (up 2%, down 3%). RRG shows relative strength. A sector can be down 1% but in Leading if Nifty is down 3%. RRG strips out market direction.
RRG vs Market Breadth
Breadth(% above EMA 200) shows internal participation. RRG shows positioning vs benchmark. A sector with strong breadth can still be in Weakening if the benchmark's breadth is even stronger.
Frequently Asked Questions
What is a relative rotation graph?
A relative rotation graph plots sectors on a scatter chart with RS-Ratio (relative strength) on X and RS-Momentum on Y. Both axes cross at 100, creating four quadrants: Leading, Improving, Weakening, Lagging. Developed by Julius de Kempenaer, now a standard tool in institutional sector rotation analysis.
How do I read an RRG chart?
Two things: where the dot is (which quadrant) and where the tail points (direction of movement). A dot in Leading with tail curving toward Weakening = outperformance about to stall. A dot crossing from Lagging into Improving = potential new rotation cycle beginning.
What is RS-Ratio and RS-Momentum?
RS-Ratio (X-axis) = sector's performance relative to benchmark. Above 100 = outperforming. RS-Momentum (Y-axis) = whether that relative performance is improving or deteriorating. Above 100 = getting better. Together they show position and direction.
What is sector rotation?
Sector rotation is money flowing between sectors as economic conditions change. Cyclicals lead during growth, defensives during uncertainty. RRG visualises this in real time, showing which sectors are gaining relative strength (entering Improving/Leading) and which are losing it.
Which sectors are currently leading?
Load all Nifty sectors on Kalpi's RRG and check the Leading (green) quadrant. Currently, positions change as rotation occurs. The sidebar shows each sector's badge and the bottom strip shows counts per quadrant.
What is the "hook" pattern on RRG?
When a sector's tail curves back from Weakening toward Leading without entering Lagging. The outperformance survived a momentum dip. Considered a high-probability continuation signal by institutional investors. Watch for hooks on Kalpi's playback animation.
Can I plot individual stocks, not just sectors?
Yes. Add any NSE stock in the search bar. Plot individual stocks against Nifty 50 for market-relative rotation, or stocks within a sector against that sector's index (e.g., HDFCBANK vs Nifty Bank) to find which stocks within a sector are leading.
RRG vs RSI: what's the difference?
RSI measures absolute overbought/oversold for one stock. RRG measures relative performance vs a benchmark across multiple securities simultaneously. RSI answers "has this risen too fast?" RRG answers "is this outperforming the market?" Use RSI for timing, RRG for selection.
How often should I check the RRG?
Weekly with a 3-6 month date range for position traders and investors. Sector rotation cycles take weeks to months. Daily checking adds noise. For swing traders, daily with 1-3 month range catches shorter cycles. Use playback instead of static snapshots.
What benchmark should I use?
Nifty 50 for sector rotation analysis (the default). For stock-level analysis within a sector, use the sector index as benchmark (e.g., Nifty Bank for banking stocks). Everything on the RRG is measured relative to the benchmark, so choosing the right one is critical.