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Nifty to extend up trend, broader market to outperform

Technical Outlook

* Despite Monday’s gap down opening the index managed to hold last week’s low of 14400 and staged a strong pullback during the week, displaying inherent strength. The weekly price action formed a bull candle at identical lows of 14420, highlighting elevated buying demand as our buy on dips strategy worked well

* Going ahead, we reiterate our positive stance on the market and expect the Nifty to eventually head towards life-time high of 15400 in May 2021. However, a move towards 15400 would not be linear in nature, as bouts of volatility owing to escalating concerns over Covid-19 2nd wave. Therefore, intermediate dips toward 14600 should be capitalised on as an incremental buying opportunity in quality stock amid progression of Q4FY21 earnings

* Key point to highlight during recent secondary corrective phase is that the index has witnessed shallow retracement, indicating robust price structure that augurs well for the next leg of the up move. Over the past six sessions, the Nifty has retraced 61.8% of the preceding five session’s ~900 points up move, which is larger in magnitude compared to the early March rally of 868 points

* Sectorally, we expect BFSI, pharma, metal to outperform while consumption provides a favourable risk-reward setup

* Among large caps, we prefer Axis Bank, Bajaj Finserv, Cadila Healthcare, Ambuja Cement, Tata Steel, Bharti Airtel, Tata Motors while Mindtree, Alkem, Jindal Steel & Power, Supreme Industries, Escorts are expected to outperform within midcap space

* In line with our view, broader markets relatively outperformed the benchmark as Nifty midcap and small cap indices have resolved out of two month’s consolidation and clocked a fresh 52-week high whereas the Nifty is still 4% away. Therefore, we expect the ongoing relative outperformance of broader markets to endure

* Structurally, we believe the index has formed a higher base around 14200 mark that has been held despite elevated volatility owing to concern over second Covid-19 wave. We expect it to hold the 14200 mark, going ahead, as it is confluence of: a) 100 days EMA at 14265 and b) last month’s low at 14151

* In the coming session, the index is likely to witness gap up opening tracking buoyant cues. However, we expect it to trade with a positive bias while maintaining higher high-low formation. Hence, use intraday dip towards 14925-14945 to create long for target of 15036.

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 32904​​​​​​​

Technical Outlook

* The weekly price action formed a bull candle with shadows in either direction, indicating elevated volatility as the index is forming higher base above the 61 . 8 % retracement of previous two week up move (30405 -34287 )

* We reiterate our positive stance with target of 34900 levels, in May’21 as it is the 61 . 8 % retracement of the entire last two months decline (37708 -30405 ) . While in the upcoming truncated week any decline towards 32000 -32400 would attract strong buying demand

* Key point to highlight is that over the past seven sessions the index has retraced just 61 . 8 % of preceding seven sessions up move (30405 -34287 ) . The slower pace of retracement indicates a higher base formation

* The slower pace of retracement after the recent up move of 3880 points, which is the larger in magnitude compared to late February up move of 2256 points highlights robust price structure and the current consolidation should be used as an incremental buying opportunity in quality banking stocks

* The index has immediate support at 32000 -31500 levels being the confluence of the last two weeks low and the 61 . 8 % retracement of the current up move (30405 -34287 ) . While the major support is placed in the range of 30500 -30000 levels

* The index has maintained the rhythm of not correcting more than 20 % as witnessed since March 2020 . In the current scenario, it rebounded after correcting 19 % from the all -time high (37708 ) . Hence it provides favourable risk -reward setup for the next leg of up move

* In the coming session, the index is expected to witness gap up opening on the back of firm global cues . We expect the index to maintain a higher high -low formation, indicating continuance of positive bias . Hence after a positive opening use dips towards 33110 -33180 for creating long position for the target of 33320 , maintain a stoploss of 33060

Nifty Bank Index – Weekly Candlestick Chart

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