IGI Logo

Nifty

Technical Outlook

• The Nifty started the truncated week on a negative note. However, supportive efforts from 200 days EMA helped index to recoup intra-week losses entirely and settle the week above 17300 mark. The weekly price action formed a bull candle carrying higher high-low, indicating follow through strength to last week’s bullish hammer candle.

• Going ahead, we expect index to consolidate in the broader range of 17500-16700 amid stock specific action. The Nifty has rallied 680 points over past five sessions that hauled short term oscillator in overbought territory, indicating couple of days breather ahead of US inflation data cannot be ruled out. However, such a breather should not be construed as negative instead any dip from hereon should be used as buying opportunity amid onset of earning season, to ride next leg of up move towards 17500. Sustainability above 17500 would lead to further acceleration of upward momentum. Our positive view is further validated by following observations:

• a) historically, September has been a volatile month. However, over past two decades, Q4 returns for Nifty has been positive (average 11% and minimum 5%) on 70% of the times. The history favours buying dips

• b) Indian equities continued to relatively outperform global peers while pricing in many negatives. We expect outperformance to continue

• Sectorally, BFSI, Consumption, Pharma and PSU expected to outperform

• Our preferred large caps are TCS, Indusind Bank, Bank of Baroda, Reliance Industries, Sun Pharma, Titan, Tata Motors, Coal India while preferred midcaps are Havells, Bajaj Electricals, TCI Express, Tata communications, Tata Chemicals, Bharat Forge, Midhani, Cyient, Kewal Kiran Clothing

• Structurally, index has undergone slower pace of retracement as over the past seven weeks’ it retraced ~38.2% of earlier nine week’s rally (15185- 18000) while absorbing global volatility, signifying healthy retracement amid relative outperformance against global peers.

• Broader markets indices have shown follow through to last weeks bullish hammer like pattern and relatively outperformed the benchmark. We expect, Nifty midcap and small cap indices to hold their September lows respectively and stage a pullback in coming weeks ahead of earnings

• In the coming session, index is likely to open with a gap down led by weak global cues. We recommend to create intraday short positions in the range 17168-17192 for target of 17078.

Bank Nifty

Technical Outlook

• The index started the week with a gap down action, only to recover the entire losses towards the end and settled above 39000 mark . In the process, price action formed a Bull candle with its body engulfing last week’s Bullish Hammers small real body with higher high -low signifying follow through strength and presence of elevated buying demand

• Going forward, we expect Bank Nifty to consolidate in 37500 - 39500 range in coming few sessions as after 2000 points rally in just four sessions prices have reached overbought range and few days consolidation cannot be ruled out . However, dips should not be construed structurally negative rather a buying opportunity ahead of onset of earnings season

• Structurally, the index has already posted faster retracement on higher degree as eight month’s decline (41829 -32990 ) was completely retraced in just two and half months highlighting end of major corrective phase and structural improvement . Hence ongoing retracement of June -September rally should not be construed negative rather would make overall trend healthier

• The Bank Nifty has key immediate support at 38000 mark being the last week’s low that also coincides with rising 100 day EMA

• Amongst momentum oscillators, weekly stochastics has eased from overbought readings to current reading of 45 making risk -reward favourable In the coming session, index is likely to open with a gap down led by weak global cues . We recommend to create intraday short positions in the range 38850 -38910 for the target of 38580 with stoploss at 39030

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
SEBI Registration number INZ000183631

Above views are of the author and not of the website kindly read disclaimer