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Nifty

Technical Outlook

• The index witnessed a gap down opening (17491-17357) tracking weak global cues. However, buying demand emerged from 20 days EMA at 17360 that has been held since early July 2022. As a result, index recouped intraday losses and settled the session at days high. The daily price action formed a piercing line candle, indicating buying demand at elevated support base. In the process, broader market relatively outperformed

• Going ahead, we expect the index to undergo healthy consolidation in the broader range of 18000-17400 wherein stock specific action would continue. Consequently, this will help the index to cool off overbought conditions formed due to 13% rally seen over past five weeks (currently weekly stochastic cooled off to 88 from 97 levels seen during last week). The secondary correction is a part of the bull market. Hence, dips from here on should be capitalised on to accumulate quality stocks. Our structural positive stance is validated by following observations:

• a) Nifty has registered a bullish golden crossover (50-day EMA crossing 200-day EMA) at 17660 indicating, structural bullish development from medium term perspective. Since 2009, in eight out of 10 such instances, the Nifty has generated average 11% return in subsequent three to four months

• b) percentage of stocks (Nifty 500) rising above their long term 200-day moving average has seen sequential improvement. From June low reading of 14%, the current reading has jumped to 48% indicating broad based nature of the rally

• c) on the structural front, current development in Indian equities is well supported by strong correlation with developed market indices. S&P500 is on the cusp of breakout from falling channel following similar breakout in Nasdaq index and broader Russell 2000 index, thus signalling end of corrective phase

• The Nifty midcap index bounced after retesting breakout area of falling channel encompassing past eight month corrective phase thereby confirming resumption of up trend. Meanwhile Nifty small cap index is hovering in the vicinity of the breakout zone of entire corrective phase falling trend line that augurs well for next leg of up move

• Structurally, prolongation of rallies underpinned by improving market breadth makes us confident to retain support base at 17200 as it is 38.2% retracement of July-August rally (15858-17992)

• In the coming session, index is likely to open on a flat note tracking muted global cues. The buying demand from 20 days EMA displays elevated support base. Hence use intraday dip towards 17502-17532 for creating long position for the target of 17618

Nifty Bank

Technical Outlook

• The daily price action formed a bullish engulfing candle as it opened lower however recovered its entire previous session decline to close above Monday’s high highlighting buying demand emerging around the 20 days EMA currently placed at 38082 levels

• Going ahead we expect the index to consolidate with positive bias in the broad range of 37000 -39500 after a strong rally of 15 % in just five weeks which has led to overbought condition in the weekly stochastic oscillator (currently placed at a reading of 87 ) .

• We believe the current breather should not be seen as negative instead would make the market healthy and provides incremental buying opportunity

• Bank Nifty has relatively outperformed the benchmark index in the last few quarters as can be seen in the Bank Nifty/Nifty ratio chart . It continues to remain in rising trend forming higher high -low and is seen sustaining above the recent falling supply breakout area joining highs since January 2021 highlighting strength and continuation of the outperformance

• The index has immediate support around 37000 -37500 levels as it is the confluence of the 28th July 2022 and the 50 % retracement of the last five weeks up move (34464 - 39759 )

• In the coming session index is likely to open on a soft note amid muted global cues . After two sessions decline index found support from 20 days EMA placed at 38000 , highlighting inherent strength . Hence, intraday dip towards 38580 -38660 for creating long position for the target of 38980 , maintain a stoploss at 38460

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