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Nifty

Technical Outlook

• The Nifty started the session on a weak note with a bearish gap (17380-17558) indicating extended profit booking after 13% gains in preceding five weeks led prices to the overbought trajectory. Only a decisive close above previous session’s highs would indicate pause in correction. Monday’s losses were primarily led by IT heavyweights while midcap and small caps relatively outperformed

• We expect the index to extend its corrective phase in coming few sessions while stock specific action may continue. The ongoing consolidation is part of a healthy retracement after sharp rally and would help oscillators to cool off and set stage for next leg of up move. Hence, one should adopt strategy of buying dips in quality companies to ride structural uptrend as strong support is placed at 16800 as it is the confluence of 50% retracement past two month’s up move (15858-17992) coinciding with rising 50 day EMA at 1690

• Our structural positive stance is validated by following observations: a) the Nifty has surpassed major downward trend line well supported by thrust in advancing stocks volume, signalling end of eight-month corrective phase, (b) In each of six instances since 2008, reading below 15 in percentage of stocks above 200 DMA (Nifty 500 universe) led to durable bottom, followed by new highs on Nifty. We expect same rhythm to be maintained this time as the indicator saw sequential improvement with current reading of 50 after bottoming out in June 2022 with reading of 14, indicating broad based participation (c) Nifty registered a bullish golden crossover in August (50-DEMA crossing above 200-DEMA) implying major shift of momentum in favour of bulls from a medium term perspective. In last decade, in eight out of 10 such instances, the Nifty has generated average 11% return in subsequent three to four months

• On the broader market front key development observed during last week has been sharp improvement in relative ratio of Nifty MidSmall 400 index against Nifty along with falling channel breakout in Nifty small cap index. Strong thrust in relative ratio signal strong outperformance in broader market space ahead

• In the coming session, index is likely to open on a positive note amid firm Asian cues. We expect the index to consolidate in a range with positive bias while holding above 17300 levels. Hence use intraday dips towards 17320-17352 for creating long position for the target of 17438

Nifty Bank

Technical Outlook

• The daily price action formed a high wave candle with a lower high -low and a bearish gap above its head (38847 - 38397 ) signaling profit booking after the recent strong up move of 15 % in the preceding five weeks

• Going ahead in the coming truncated week we expect the index to continue with its current consolidation in the broad range of 37000 -39000 with PSU banking stocks continuing its outperformance . Consequently, this will help the index to cool off overbought conditions (currently weekly stochastic cooled off to 77 from 95 levels seen during last week)

• We believe the current consolidation should not be seen as negative instead would make the market healthy and provides incremental buying opportunity in quality banking stocks from medium term prospective

• Bank Nifty continue to relatively outperformed the benchmark index in the last few quarters as can be seen in the Bank Nifty/Nifty ratio chart . Within the banking stocks PSU banking stocks has been resilient and showing relative strength which we expect to outperform going forward

• The index has major support around 36500 -37000 levels as it is the confluence of the 200 days SMA placed at 36400 and 61 . 8 % retracement of the recent major up move (34464 -39759

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