01-01-1970 12:00 AM | Source: ICICI Direct
The equity benchmark maintained its winning streak over third session in a row amid mixed global cues - ICICI Direct
News By Tags | #2730 #3961 #879 #1014 #59

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Nifty: 18348

Technical Outlook

• The equity benchmark maintained its winning streak over third session in a row amid mixed global cues. The Nifty concluded Tuesday’s session at 18348, up 36 points or 0.2%. The market breadth remained positive with A/D ratio of 1.1:1. Sectorally, auto, pharma, Oil & gas, metal outshone while, IT, Consumer durables took a breather .

• The index started Tuesday’s session with a positive gap (18314-18362) and subsequently traded in a narrow range. However, fag end profit booking dragged index near day’s low. As a result, daily price action formed a small bear candle carrying higher high-low, indicating breather after two days up move. In the process, stock specific action prevailed as Nifty midcap index relatively outperformed by gaining 0.5%.

• The lack of faster pace of retracement on either side signifies prolongation of ongoing consolidation in the broader range of 18500-18000 wherein broader market to relatively outperform the benchmark. In the process, bouts of volatility owing to monthly expiry week coupled with global volatility cannot be ruled out. Therefore, dips should be capitalised on to accumulate quality stocks in a staggered manner. Structurally, our positive stance is further validated by following observations:

• a) the sustenance above 20 days EMA after bouncing from the lower band of consolidation (18000), signifies robust price structure

• b) the Bank Nifty is hovering in the vicinity of all-time High. The resilience in Bank Nifty (which carries 38% weightage in Nifty) displays inherent strength

• c) we expect Nifty small cap space to witness catch up activity as many small cap stocks which are not part of small cap index are coming out of large consolidations. Highlighting point is that, the Nifty midcap index is just 1% away from its all-time High whereas Nifty small cap index is still 17% away. Thus, quality small cap stocks should be in focus

• d) FII’s inflows have remained sturdy in May which is a key supporting factor for acceleration of structural uptrend ahead

• The broader market indices continued with their relative outperformance while maintaining higher peak and trough, indicating elevated buying demand. Thus, broader market should be in focus as we approach the fag end of the earning season

• Structurally, formation of higher high-low on the monthly chart signifies elevated buying demand that makes us confident to keep support base at 17800 as it is 38.2% retracement of Mar-May up move (16828-18458) coincided with 50 days EMA placed at 17890

• In the coming session, index is likely to open on a negative note tracking profit booking in global equity market. We expect the index to trade with corrective bias as the index is reacting lower from near the upper band of the recent consolidation range 18500-18000. Hence, after a negative opening use intraday pullback in May future towards 18348-18378 to create short positions for target of 18261 with a stoploss of 18417.

 

Nifty Bank: 43954

Technical Outlook

• The daily price action formed a second consecutive high wave candle with a higher high -low signalling continuation of the consolidation after recent strong up move of 15 % points in the last eight weeks

• Going ahead, index is likely to extend the consolidation and form a base in the coming sessions amid higher volatility on account of the monthly expiry . Only a firm closing above the all -time high (44151 ) will open further upside towards 44900 levels in coming weeks . However, the up move towards 44900 would be in a non -linear manner as bouts of volatility after last two months strong up move cannot be ruled out, hence dips should be used as a buying opportunity

• Key observation in the weekly chart of Bank Nifty is that it has witnessed a faster retracement of the 14week decline (44151 - 38613 ) during Dec22 -Mar23 in just seven weeks . Faster retracement in just half the time interval indicating structural improvement from medium term perspective

• On relative terms, Bank Nifty continues to outperform the Nifty . The Bank Nifty/Nifty ratio line continues to trend higher and maintain higher high -low signalling extended period of outperformance .

• The index has key support at 42700 levels being the confluence of the recent low and the 38 . 2 % retracement of the recent up move (39610 -44151 )

• Weekly Stochastic is seen reacting lower from the oversold territory, consolidation in the coming weeks will help the index to cool off the overbought condition

• In the coming session, the index is likely to open on a negative note amid profit booking in global equity market . Index to extend its consolidation with corrective bias . Hence, after a negative opening use intraday pullback towards 43980 -44060 for creating short position for the target of 43730 , maintain stoploss at 44160

 

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