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Broader market outperformance to continue

Technical Outlook

* Equity benchmarks recovered intraweek losses and concluded a volatile week on a flat note. The Nifty ended the week at 14835, down 0.2%. Meanwhile, broader market outperformed as Nifty midcap rose 1.6% while small cap zoomed 3.3%. Sectorally, metal, IT and pharma outshone while financials underperformed. 

* The weekly price action formed a Doji candle highlighting elevated volatility. The long lower shadow at key support threshold of 14400 which has been held over past three consecutive weeks despite host of news flow regarding rising Covid-19 cases, signifies elevated support base. In the process, the index maintained the rhythm of not correcting for more than average 9%, since March 2020, indicating broader positive structure is intact

* Our bottom up approach signifies that outperformance of IT, pharma, consumption is expected to continue while downside will be limited in key BFSI heavyweights due to its oversold conditions. We expect the index to eventually resolve above the upper band of consolidation at 14900 and retest all-time high of 15430 in coming months. Hence, any cool off from here on should be capitalised on as incremental buying opportunity in quality large cap and midcaps as we embark upon Q4FY21 result season

* In the coming truncated week, we expect index to consolidate in the broad range of 15000-14500 amid positive bias wherein broader market would continue to outperform

* On the stock front, we remain constructive on TCS, L&T InfoTech, Cipla, Divis Labs, Dabur, Titan in large caps. Meanwhile, InfoEdge, Matrimony, Indoco Remedies, Strides Pharma, Zydus Wellness, Amber Enterprises, IEX, Bajaj Electricals, Timken are expected to outperform in midcap space

* On expected lines, the broader market indices regained upward momentum after maintaining the rhythm of not correcting for more than 9-10% since March 2020 and relatively outperformed the benchmark. In the process, Nifty small cap index scaled its 52-week high. Going ahead, we expect the broader market to outperform wherein small cap would witness catch up activity as midcap index is hovering at life time high whereas small cap index is still 11% away from lifetime highs

* Structurally, during ongoing consolidation, subsequent corrections are getting shallower followed by elongated up moves, indicating strong base has been formed at 14400 as it is 61.8% retracement of the post Budget rally (13662-15432), at 14338 In the coming session, index is likely to open on a negative note tracking subdued Asian cues. Formation of lower high-low signifies pasue in upward momentum. Hence, use intraday pullback towards 14850-14878 to create short for target of 14764

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 32448

Technical Outlook

* The Nifty Bank index traded with corrective bias and closed sharply down by more than 4 % on weekly basis . Financial continues to underperform the benchmark indices . The decline was mainly lead by the private banking stocks as the Nifty private bank index closed lower by 4 % while the PSU bank index closed lower by 1 % . The Nifty Bank closed the week at 32448 down by 1410 points or 4 . 2 % 

* The weekly price action formed a sizable bear candle with a lower high -low signalling continuation of the corrective bias . The index in the last three weeks is seen consolidating around the the major breakout area above the yearly high of CY 2019 & CY 2020 placed around 32500 levels .

* Going ahead , the index sustaining above previous week low (32141 ) will keep pullback option open towards 34000 levels . Failure to do so and a close below previous week low (32141 ) will signal extension of the current corrective decline towards 31000 levels in the coming weeks

* 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 . However, the index require to start forming higher high -low in the daily chart on a sustained basis and close above the immediate hurdle of 34000 to signal a resumption of up move

* The index is currently placed near the support area 32500 -32200 levels being the confluence of the following technical observations : a) 61 . 8 % retracement of the previous rally (29687 -37708 ) placed at 32750 levels b) Major breakout area of previous multiple yearly highs placed around 32500 levels c)The rising 100 days EMA is also placed at 32252 levels

* The index has strong hurdle at 34000 levels as it is the confluence of the recent high and 50 % retracement of the last leg of decline (36497 -32141 ) .

* In the coming session, the index is likely to open on a negative note on back of soft global cues . Volatility is likely to remain high . We expect the index to trade with corrective bias . Hence after a negative opening use pullback towards 32530 -32590 for creating short position for the target of 32310 , maintain a stoploss of 32690

Nifty Bank Index – Weekly Candlestick Chart

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