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Broader market to relatively outperform benchmark…

Technical Outlook

* Equity benchmarks snapped their past two week’s corrective decline and staged a strong comeback that helped the Nifty to scale a fresh all-time high of 15015. The Nifty ended the week at 14924, up 9.5%. Broader markets marginally underperformed, as the Nifty midcap, small cap gained ~7%, each. Sectorally, all major indices ended in the green led by financials, metal, infra and auto. 

* In line with our view, the Nifty maintained the rhythm of not correcting for more than a week and an average correction of 8-10%. In the process, the index respected key support of the 50 days EMA that coincided with rising trend line around 13600, which has been held on multiple occasions since March 2020. This coupled with faster retracement of pre-budget corrective phase, signals robustness of price structure and further strengthening of medium term up trend. Consequently, weekly price action formed a strongest bull candle since April 2020, indicating inherent strength

* Going ahead, we expect the index to head towards 15500 in coming months as revived momentum in cyclicals backed by strong market breadth makes us confident to reiterate our constructive stance. We believe traction in banking, infra, pharma and consumption would drive the index higher towards 15500, as it is 161.8% external retracement of past two week’s fall (14754-13596), at 15466.

* Key point to highlight is that the Nifty has rallied ~1420 points over past five sessions, which hauled the daily stochastic oscillator in overbought territory (at 95), indicating a couple of days temporary breather at higher levels cannot be ruled out. Therefore, capitalising on dips to go long in quality large cap and midcap would be the prudent strategy to ride next leg of rally

* Broader market witnessed faster pace of retracement during the week as it retraced past 14 session’s decline in just three sessions, indicating robust price structure that augurs well for further acceleration of upward momentum. In the process, Nifty Midcap index recorded a fresh all-time high, whereas small cap index is still ~20% away from all-time high. Therefore, we expect small caps to witness catch up activity within broader market space

* Structurally, formation of higher peak, trough on the larger degree chart signifies sturdy up trend is intact as per classic Dow Theory.

* Therefore, we revise support base upward, as we expect strong buying demand to emerge in the vicinity of 14400, as it is confluence of 38.2% retracement of current up move (13597-15015), placed at 14473 coincided with Tuesday’s positive gap area of 14469-14281 In the coming session, Nifty future is likely to open on a positive note tracking firm global cues.

* We expect index to trade with a positive bias and maintain a higher high-low formation. Hence, use intraday dips towards 14925-14948 to create long position for the target of 15035. 

NSE Nifty Weekly Candlestick Chart 

Bank Nifty: 35654

Technical Outlook

* The Nifty Bank index cheered Union Budget to post strongest weekly gain since 2009 . The index gained 16 . 6 % to settle at 35654 . The Nifty PSU banking index outperformed with 25 % gain against its private peer (13 . 5 % ) . 

* The weekly price action formed a strong bull candle which resulted in faster retracement of preceding three week corrective phase, signaling robust prices structure and further strengthening of larger uptrend . In the process, index surpassed our target of 35900 levels indicating extension of ongoing rally

* Going ahead, we expect the index to maintain its overall positive stance and head towards 36700 in coming weeks while elevated support is now being placed at 33900 levels . However, after a rally of 6900 points gain in just seven trading sessions has led stochastic to overbought trajectory with reading of 96 . Hence intermediate profit booking at higher levels cannot be ruled out and one should adopt buy on decline strategy

* Target of 36700 levels is projected based on 123 . 6 % external retracement of entire CY20 decline (32613 -16116 )

* We are confident in revising support upwards at 33900 mark which is : a) 38 . 2 % retracement of the current up move 29687 to 36615 b) Value of a bullish gap post Budget day at 33583 levels

* In the coming session, we expect index is likely to open with a positive gap tracking firm global cues. We expect index to trade with a positive bias while maintaining higher low formation .

* Hence , after a positive opening we recommend to utilize intra day dips towards 35710 -35780 create fresh long positions in Bank Nifty February Futures to for target of 35980 meanwhile stop loss is placed at 35610 Among the oscillators, the weekly stochastic is rebounding from the neutral reading of 50 thus supports the overall positive bias in the index in the short term

Bank Nifty Index – Weekly Candlestick Chart

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