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NSE (Nifty): 14505

Technical Outlook

* Equity benchmarks regained some of the lost ground on Tuesday as approval for various vaccines lifted sentiments. The Nifty gained 215 points or 1.40% to settle at 14505. The market breadth turned positive with A/D ratio of 2:1. Sectorally, all major indices ended in the green barring IT and pharma. 

* The Nifty started the session on a flattish note and then traded volatile in the first half of the session. Strong demand across sectors led by beaten down BFSI and auto space led the index higher in the process retracing half the losses of Monday. Consequently, the price action formed an inside day indicating a pause in downward momentum and presence of buying demand for the third time in five weeks around the 14250 mark

* Going ahead, sustainability above Monday’s high (14700) would indicate conclusion of ongoing consolidation phase else there extended consolidation will continue within 14250-14700 region amid stock specific action. Only a decisive close below 14250 would signal an extended profit booking

* The broader market indices have undergone healthy profit booking after approaching their 52 weeks highs. Key point to highlight since March 2020 is that Nifty midcap and small cap indices have maintained the rhythm of not correcting for more than average 9-10% while sustaining above their 50 days EMA, indicating robust price structure. Currently, the past couple of days 7% correction dragged both indices in the vicinity of their 50 days EMA, indicating possibility of couple of percentage correction from here on cannot be ruled out. However, such a correction should be capitalised on to accumulate quality stocks, as we expect broader market indices to maintain aforementioned rhythm of not correcting for more than 9-10%

* Immediate support for the Nifty is at 14250 while key structural support is placed at 13800 levels as it is confluence of:

* a) since March 2020, intermediate corrections in the Nifty have been to the tune of 9-10%. In the current scenario 10% correction will complete around 13900

* b) 80% retracement of the February rally (13596-15432), at 13963 In the coming expiry session, we expect volatility to stay elevated. Index is likely to open on a positive note tracking firm global cues. We expect index to continue with ongoing pullback. Hence, use intraday dip towards 14565-14590 to create l for target of 14679.

NSE Nifty Daily Candlestick Chart

Nifty Bank: 31771

Technical Outlook

* The Nifty Bank index snapped a three session loosing streak as it recouped most of its Monday's decline to close higher by 3 % on Tuesday . The pullback was broad based as all the 12 index constituents closed in the green . The Nifty Bank closed the session at 31771 up by 979 points or 3 . 2 % 

* The daily price action formed a strong bull candle with a higher high -low signalling a strong pullback after previous session sharp decline . The index in today’s session is opening on a positive note at the Monday’s gap down area (32330 -31700 ) signalling continuation of the pullback .

* Goining ahead, a close above the Monday’s gap down area will signal a pause in the current corrective trend and will opens upside towards 34000 levels . Failure to do so will lead to a choppy consolidation in the broad range of 32500 -30000 in the coming sessions amid stock specific action ahead of Q 4FY21 result season

* Key observation is that the index in the current bull market that is since March 2020 , has seen two major correction during April and September 2020 . The average of the two correction comes around 21 % . In the current scenario the index has already corrected by 19 % from the all time -high (37708 ) . We expect the index to maintain the same rhythm and hold onto the major support area of 29700 -30000 which also confluence with the 200 days EMA placed around 29750 levels and the previous major low of January 2021 , prior to the union budget is placed around 29687 levels

* W e advise Investor should adopt strategy of utilising the current declines to accumulate quality banking stocks from medium term prospective .

* The last eight weeks corrective decline has lead to the weekly stochastic placed near the oversold territory with a reading of 20 , indicating an impending pullback in the coming weeks .

* In the coming session, the index is expected to open gap up . Volatility is likely to remain high on account of the weekly expiry . The index is expected to continue with its Tuesday’s pullback . Hence after a positive opening use dips towards 31900 -31970 for creating long position for the target of 32180 , maintain a stoploss of 31790

Nifty Bank Index – Daily Candlestick Chart

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