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Nifty : 17827

Day that was…

Equity benchmarks extended breather over third session in a row tracking muted global cues. The Nifty settled the session at 17827, down 18 points. Market breadth remained negative with A/D ratio of 1:1.5. Sectorally, FMCG, consumer durables outshone while IT, PSU Bank, realty extended breather

Technical Outlook

• The index formed a lower high-low over third consecutive session wherein elevated volatile prevailed as Nifty oscillated by more than 420 points during the day. The daily price action formed a bear candle, indicating extended breather in the vicinity of 100 days EMA.

• The index is hovering around the breakout area of 10 week’s falling channel, indicating temporary breather. The formation of lower high-low signifies short term corrective bias. Thus for a meaningful pullback to materialise, index need to witness follow through strength above previous sessions high (on a closing basis) that would open the door to head towards 18300 in coming weeks as it is 61.8% retracement of the entire correction since January 2023 (18887-17353). Else, prolonged correction towards key support of 200 days EMA placed at 17600 while absorbing anxiety around prolonged rate hike. Thus, dip from here on should be capitalised on as an incremental buying opportunity in quality stock as stock specific action would prevail. Our positive bias is further validated by following observations:

• a) DIIs have been pillars of strength during corrective phase. Now, with FII selling tapering since last week, we expect an acceleration in the uptrend in coming weeks

• b) The global setup has been positive since the beginning of CY23. Some European indices have hit new lifetime highs while US indices are consolidating after a sharp up move in January. Expect India to catch up

• Structurally, formation of higher low signifies elevated buying demand that makes us confident to revise support base upward at 17600 as it is confluence of: a) 61.8% retracement of past three weeks rally 17353-18134, b) 200 days EMA is placed at 17580

• The broader markets regained upward momentum after forming a higher base above Sept-22 lows. Going ahead, follow through strength above past 3 week’s high would confirm conclusion of corrective bias and open the door for next leg of up move

• In the coming session, index is likely to open on a subdued note tracking weak global cues. The formation of lower high-low signifies corrective bias. Thus, intraday pullback towards 17860- 17892 should be used to create intraday short positions for target of 17929

Nifty Bank: 40673

Day that was…

The Bank Nifty traded with corrective bias and closed lower for the fourth consecutive session down marginally by 0 . 1 % on Tuesday . The PSU banking stocks underperformed as the PSU bank index closed lower by 1 . 8 % . The Bank Nifty closed the session at 40673 levels down marginally by 28 points or 0 . 1 %

Technical Outlook

• The daily price action formed a high wave candle with a lower high -low signalling continuation of the corrective decline for the fourth consecutive sessions .

• Lack of faster retracement in either direction signals continuation of the overall consolidation in the broad range of 42000 -40000 . Index has strong support around 40000 levels which we expect to hold . Hence, the corrective decline towards the support area should be used to accumulate quality banking stocks for up move towards the upper band of the range placed around 42000 levels in the coming week

• Key point to highlight is that since CY20 (Covid lows) intermediate corrections have lasted for 9 -11 weeks in a row . In the current scenario the index has already witnessed 10 weeks of corrective decline retracing 65 % of its preceding 10 weeks rally of October –December (37387 -44151 ) . The maturity of timewise correction makes us believe the stage has been set to resolve out of upper band of ongoing broad consolidation

• Structurally, slower pace of retracement signifies strength that makes us believe any extended correction from here on will find strong support around 40000 levels being the confluence of (a) 80 % retracement of the recent pullback (39420 -41979 ) at 40030 levels (b) the presence of long term 200 days EMA is also placed at 40008

• The weekly stochastic is seen consolidating around the neutral reading of 50 while holding above its three periods average signalling positive bias

In the coming session, the index is likely to open on a negative note amid weak Global cues . Index continue to form lower high - low in daily chart signalling corrective bias . Hence, after a negative opening use intraday pullback towards 40820 -40900 for creating short position for the target of 40570 , maintain a stoploss of 41010

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