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Buy on dips strategy should be in focus

Technical Outlook

• The index saw elevated volatility during the week amid escalated geopolitical issues and spike in crude oil prices. In the process, the Nifty managed to hold the key support threshold of 16800 for fourth time in last two months while absorbing host of negative news, highlighting inherent strength. As a result, weekly price action formed a small bull candle with shadows on either side, indicating rise in volatility while sustaining above key support of 16800

• Key point to highlight is that, in the ongoing corrective move (since mid-January 2022) the index has failed to sustain above previous week’s high. Therefore, in the coming expiry week, a decisive close above last week’s high (17490) along with cool off in India VIX (that gauges market sentiment) would be the key monitorable that would set the stage for a gradual move towards 17800 in coming weeks as it is confluence of: a) 61.8% retracement of mid-January decline (18350- 16836), is at 17772 b) February high is placed at 17794

• Structurally, over past five weeks’ index has retraced 80% of the preceding four weeks rally (16410-18350). Slower pace of retracement signifies that the broader bullish structure is still intact. Thus, we believe, extended breather from hereon should not be construed as negative, instead dips should be capitalised to accumulate quality large caps as we do not expect Nifty to breach key support of 16800, as it corroborates with:

• a) 80% retracement of December-January rally (16410-18350), placed at 16798 b) Panic low recorded in January 2022 is placed at 16836

• c) 200 days EMA is placed at 16712

• Our preferred sectors are BFSI, Capital goods, Metals and Auto

• In large caps we like Axis Bank, SBI, Bajaj Finance, Reliance Industries, Infosys, Asian Paints, Titan, Tata Steel, Tata Motors while in Midcaps we prefer Siemens, Cummins India, Bharat Dynamics, Voltas, KNR Constructions, Inox Leisure, Trent, Taj GVK

• The broader market indices relatively underperformed the benchmark in the week went by which hauled Nifty midcap and small cap index in the vicinity of 200 days EMA. We believe extended breather from hereon would make broader markets healthy wherein stock specific action would prevail In the coming session, index is likely to witness subdued opening tracking muted global cues. We expect volatility to remain high owing to ongoing geopolitical issue wherein we expect buying demand to emerge around 17100.Thus, use intraday dip towards 17105-17137 for creating long position for target of 17223

NSE Nifty Daily Candlestick Chart

Nifty Bank: 37599

Technical Outlook

• The weekly price action formed a second consecutive doji candle with long shadows in either direction highlighting intraweek volatility and continuation of the overall consolidation

• Bank Nifty index has been trading in a broad range of 39400 and 36500 over past five weeks now within which it has failed to generate faster retracement on either sides indicating extended consolidation over next few sessions and higher base formation around 36500 levels

• Structurally ongoing consolidation would help index workout of overbought trajectory and set the stage for next leg of up move towards 39400 levels . Therefore, any dip should not be construed as negative rather would present an incremental buying opportunity

• The index has support around 36500 levels being the confluence of the following technical observations :

• (a) 200 days EMA currently placed at 36190 • (b) 50% retracement of the previous major up move (34018 - 39424 ) is placed around 36700 levels

• (c) the lower band of the last five weeks’ range is also placed around 36500 levels

• Among the oscillators the weekly stochastic is seen cooling off from the overbought territory and is currently placed at a reading of 65 signaling continuation of the current consolidation in the coming week In the coming session, index is likely to open on a soft note amid weak global cues . Volatility is likely to remain high on account of volatile global cues . We expect index to trade in a range and buying demand to emerge around the 61 . 8 % retracement of the Tuesday up move around 37200 levels . Hence use dips towards 37130 -37190 for creating long position for target of 37460 , maintain a stop loss at 37010

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