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Nifty: 18182

Technical Outlook

• The index inched southward after subdued opening as profit booking in recently run up stocks continued after approaching upper band of consolidation placed around 18500. As a result, daily price action formed a bear candle carrying lower high-low, indicating extended breather. In the process, Nifty small cap index relatively outperformed by gaining 0.5% despite extended breather in the benchmark

• Going ahead, we expect prolongation of consolidation in the broader range of 18500-18000 wherein stocks specific action would prevail. Key point to highlight is that, secondary correction in a part of the primary bull trend. Thus, buying on dips strategy should be adopted in quality stocks amid progression of earning season. Structurally, our positive bias remain intact based on following observations:

• a) The Bank Nifty (which carries 38% weightage in Nifty) has retraced past fourteen weeks decline in just seven weeks and retested the all time high of 44151. Faster pace of retracement signifies structural turnaround

• b) The current rally is backed by improvement in market breadth as the percentage of stocks above 200 days EMA for the Nifty 500 universe have jumped to 57% compared to last week’s reading of 52% which depicts broader market participation

• c) On the macro front, benign industrial commodities, brent prices and prospects of further softening of yields domestically and globally would be key tailwinds for the Indian equities

• d) FII’s inflows have remained sturdy in May (~20k Cr so far) which is a key supporting factor for acceleration of structural uptrend ahead

• The broader market indices have been relatively outperforming the benchmark index, highlighting inherent strength. Key point to highlight is that, The midcap index is within 2% vicinity of its All Time High. Thus, Mid-cap stocks should be in focus amid progression of earning season

• Structurally, formation of higher high-low on the weekly chart signifies elevated buying demand that makes us confident to retain support base at 18000 as it is 50% retracement of current up move (17554-18390) coincided with current month’s low of 18042

• In the coming session, the index is likely to open on a positive note amid pullback in global equity market. Index to witness pullback after last two sessions corrective decline. Volatility is likely to be high on account of weekly expiry. Stock specific action will continue to remain in focus. Hence, create long position in the range of 18200-18232 for the target of 18309, maintain stoploss at 18163.

Nifty Bank: 43698

Technical Outlook

• The daily price action formed a small bear candle with a lower high -low signalling consolidation amid stock specific action after the recent strong up move

• Going ahead, we expect the index to maintain overall positive bias and gradually head towards 44900 levels in coming weeks being the measuring implication of the recent six sessions range breakout area (43739 -42582 ) . However, the up move towards 44900 would be in a non - linear manner as seen in the last two sessions as bouts of volatility after rallying more than 12 % in just seven weeks cannot be ruled out, hence dips should be used as a buying opportunity .

• Key observation in the weekly chart of Bank Nifty is that it has witnessed a faster retracement of the 14week decline (44151 -38613 ) during Dec22 -Mar23 in just seven weeks . Faster retracement in just half the time interval indicating structural improvement from medium term perspective

• On relative terms, Bank Nifty continues to outperform the Nifty . The Bank Nifty/Nifty ratio line continues to trend higher and maintain higher high -low signalling extended period of outperformance

• The index has key support at 42500 levels being the confluence of the last two weeks lows and the 38 . 2 % retracement of the recent up move (39610 -44151 )

• In the coming session, the index is likely to open on a firm note amid pullback in global equity market . Volatility is likely to be high on account of weekly expiry . Index to consolidate with positive bias . Hence, create long position in the range of 43610 -43690 for the target of 43940 , maintain stoploss at 43490

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