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Nifty: 15808

Day that was…

Equity benchmarks plummeted over fifth session in a row tracking weak global cues owing to higher than expected US inflation data and rupee's depreciation to an all-time low dented the market sentiment. The Nifty concluded weekly derivative expiry session at 15808, down 359 points or 2.2%. All major indices ended in red weighed by financials, metal

Technical Outlook

• The Nifty witnessed a gap down opening below 16100, contrary to our expectation and drifted downward throughout the day as intraday pullbacks were short lived. As a result, daily price action formed a sizable bear candle carrying lower high-low, indicating acceleration of downward momentum. In the process, daily cash turnover 56600 crores remained below its 3 month average of 64000 crores indicating lack of participation

• Key point to highlight is that, index has failed to sustain above previous session high over past nine consecutive sessions. The formation of lower high-low exhibits corrective bias. Thus, to pause the ongoing downward momentum index need to form a higher high-low formation along with a decisive close above previous session’s high. Failure to do so would lead to prolongation of corrective bias amid ongoing global volatility. Meanwhile, stability in rupee, dollar index and VIX overseas will be the key monitorable for cool off in sentiment that would consequently help the market to find support in the 15600-15400 zone as it is 61.8% retracement of CY21 rally. Even though short term trend remains down, structurally ongoing correction is part of a retracement of CY20-21 rally. Hence investors should use current weakness to their advantage and focus on constructing portfolios of quality companies in staggered manner.

• The past four weeks corrective move hauled daily and weekly stochastic oscillator in extreme oversold territory (currently placed at 13 and 8). Historically, after approaching such lower reading, markets have witnessed technical pullback. However, a decisive close above previous session high would confirm abating downward momentum. Meanwhile, immediate upsides are capped at current week’s high of 16400

• Historically, over past two decades, on 16 out of 20 occasions despite transitory breach (not greater than 5%) of 52-week EMA (currently 16600) index has generated decent returns in subsequent 3 month and 6 months. In current scenario 5% from 200 days EMA will mature at 15700

• The broader market indices continued to underperform with lower high-low formation. We expect pullbacks to be short lived and selective in this space

In the coming session, index is likely to witness gap up opening tracking positive Asian cues. We expect, index to hold Thursday’s low of 15733 and stage a pullback amid oversold reading. Meanwhile, volatility would remain high. Hence, use dip towards 15730-15766 should be used for creating long position for target of 15849

Nifty Bank: 33532

Day that was :

The Bank Nifty witnessed sharp decline and closed the weekly expiry session lower by more than 3 % on Thursday amid weak global cues . The decline was broad based as all the 12 index constituents closed in the red . The Bank Nifty closed the session at 33532 levels down by 1161 points or 3 .35 % on Thursday

Technical Outlook

• The daily price action formed a sizable bear candle with a lower high -low as the index failed to witness follow through buying to last two sessions up move and gave up its gains to closed below the support area of 34000 -33800 signaling continuation of the corrective decline

• The index need to start forming higher high -low in the daily chart on a sustained basis for any pullback to materialize . Failure to do so will keep the immediate bias down and extend the current corrective decline towards the March low (32155)

• On the higher side the Index has stiff hurdle around 35000 levels being the confluence of the bearish gap area of 6 th May 2022 and the 38 . 2 % retracement of current decline (38765 -33927 )

• The index has support around 31500 -32000 levels as it is confluence of :

• (a) March low placed at 32155 • (b) Equality with previous major decline of last 2 years signals support at 31500 levels

• Among the oscillators the weekly stochastic has approached oversold territory however it continues to remain in downtrend and is currently placed at an reading of 12 In the coming session, index is likely to open on a positive note amid pullback in Asian market .

We expect index to trade in a range and attempt a pullback towards 34000 levels . Hence after a positive opening use intraday dips towards 33590 -33670 for creating long position for the target of 33930 , maintain a stoploss at 33470

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