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Elevated volatility amid eventful week to offers incremental buying opportunity…

Technical Outlook

• In line with our view, Nifty resolved higher and approached our target of 16600 (as discussed in July month strategy). The index witnessed a gap up opening and gradually inched northward during the week. The weekly price action formed a sizable bull candle carrying higher high-low, indicating acceleration of upward momentum. As a result, index is sustaining well above its 200 days EMA, indicating rejuvenation of upward momentum

• The current 10% rally is longer in magnitude compared to intermediate rallies off April high of 18114 wherein shift in sectoral leadership observed to BFSI and auto. The elongation of rallies supported by across sector participation signifies inherent strength that makes us confident to revise target to the psychological mark of 17000 for coming weeks as it is 61.8% retracement of April-June decline (18114-15183). However, we believe, the move towards 17000 would not be in a linear manner as bouts of volatility cannot be ruled out owing to U.S Fed meet and monthly expiry in coming week amid overbought conditions of daily stochastic oscillator (currently placed at 95). Thus, temporary breather from hereon should not be construed as negative instead dips should be capitalised as incremental buying opportunity.

• Sectorally, BFSI, Auto and Capital goods remain at the leadership role given their outperformance while IT, metal and Real estate are expected to witness technical pull back and offer favourable risk-reward

• In large caps we prefer HDFC, SBI, Bajaj Finance, TCS, Siemens, Maruti Suzuki, ITC, Marico, Dr. Reddy, Hindalco, Titan in large caps while in midcaps we like Coforge, Persistent Systems, Brigade enterprises, Caplin points, Thermax, Indian Hotels, Federal Bank, TTK Prestige

• Structurally, the breadth indicator, measured by percentage of stocks above 50 day moving average have jumped from 22% at the beginning of July to current reading of 77% indicating broad based nature of rally that augurs well for durability of ongoing up move which makes us confident to revise support base upward at 16300 as it is confluence of: a) 50% retracement of past five days move (15858-16752) b) as per change of polarity concept past two weeks identical high of 16275 would now act as key support

• On the broader market front, the benchmark index Nifty and midcap index have approached their 200 days EMA, however small cap index is still 6% away from its 200 days EMA. Thus, we expect catch up activity to be seen in the broader market. Hence, focus should be on accumulating quality mid and small caps amid ongoing earning season

• In the coming session, index is likely to open on a subdued note tracking muted global cues. The formation of higher high-low signifies elevated buying demand. Hence, use intraday dip towards 16640-16672 for creating long position for the target of 16763

NSE Nifty Daily Candlestick Chart

Nifty Bank: 36739

Technical Outlook

• The weekly price action formed a strong bull candle which maintained higher high -low and closed firmly above the 200 days EMA (currently at 35424 ) highlighting strength and continuation of the current up move

• The rallies are getting bigger in magnitude while declines are smaller and short lived indicating improving price structure, which makes us confident to revise target to 37500 levels in the coming weeks being the 80 % retracement of the previous major decline (38765 -32290 )

• The up move towards 37500 levels is likely to be in a non -liner manner bouts of volatility owing to U . S Fed meet and monthly expiry in coming week cannot be ruled out . However, only a decisive close below previous session low (36286 ) would lead to a breather, else continuation of upward momentum . However, temporary breather from hereon should not be construed as negative instead dips should be capitalised as incremental buying opportunity

• Key observation in the recent market correction and during the last five -week pullback is that the Bank Nifty is relatively outperforming the Nifty . It is also highlighted in the Bank Nifty/Nifty ratio chart as it is seen breaking above the falling supply line joining recent highs highlighting strength and continuation of the current outperformance

• The formation of higher high -low on the weekly chart makes us confident to revise the support base higher towards 35400 levels as it is the confluence of the 200 days EMA and the 61 . 8 % retracement of the last week up move (34463 -36823 )

• Among the oscillators, the weekly stochastic remain in strong up trend thus supports the overall positive bias in the index

In the coming session, index is likely to open on a flat to negative note amid soft global cues . We expect the index to trade in a range with positive bias while maintaining higher high -low . Hence use intraday dips towards 36500 -36580 for creating long position for the target of 36830 , maintain a stoploss at 36390

Nifty Bank Index – Weekly Candlestick Chart

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