Relative Rotation Graph (RRG): Track Sector Rotation and Relative Strength for Nifty
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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. RRG measures 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.