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Life time high conquered, consolidation to create fresh opportunities towards 16400

Technical Outlook..

* In line with our view, Nifty resolved above 15400 mark and approached the vicinity of the psychological mark of 16000. Subsequently, the index underwent healthy retracement amid overbought conditions. Nifty midcap and small cap relatively outperformed gaining more than 4% each for the month

* We expect the Nifty of to maintain its northbound journey and gradually head towards our earmarked target of 16200-16400 range, led by IT, BFSI, auto and infra. Meanwhile, a move toward 16400 would not be in a linear manner as intermediate bouts of volatility owing to a) overbought conditions b) Q1FY22 earnings, cannot be ruled out. Over the past one year such temporary volatility/consolidation always offered incremental buying opportunity. Hence, we recommend sticking to quality and, subsequently, adhering to buying on declines, as we expect strong buying demand to emerge around 15400-15200

* Broader markets are expected to undergo healthy consolidation after 22% rally, amid robust price structure. Thus, temporary breather should be used as incremental buying opportunity

NSE Nifty Daily Bar Chart

Nifty: Healthy consolidation to offer incremental buying opportunity…

Technical Outlook​​​​​​​

* On expected lines, the Nifty resolved higher and scaled a fresh all-time high of 15902. We expect the index to continue its northbound journey and gradually head towards 16200- 16400 as it is confluence of:

* a) implied target of CY17-20 broad based consolidation breakout (12200-8000), at 16200

* b) breakout from past three month’s range (15400-14400) would pave the way towards 16400

* c) 161.8% external retracement of February-April decline (15432- 14151), is placed at 16223

* The Nifty has rallied 12% over the past two months leading it into overbought territory. Therefore, intermediate bouts of volatility at higher levels should not be seen as negative. Instead, dips should be capitalised on as incremental buying opportunity, as we expect elevated buying demand to emerge around 15400-15200 range as it is confluence of:

* a) 61.8% retracement of past four week’s rally (14885-15901), at 15274

* b) past five week’s low is placed at 15145

Bank Nifty: Shallow retracement signals higher base formation for next up move towards 36600

Technical Outlook​​​​​​​

* After a sharp up move of more than 8% in May 2021, the Bank Nifty has seen a higher base formation in the last three weeks around the major support area of 34000. We believe the recent breather is approaching maturity and the index will resume its up move

* Going ahead, we expect the index to gradually head towards 36600 in coming month as it is the confluence of the previous major high of March 2021 and the 138.2% external retracement of the recent breather (35810-33908)

* In a smaller time frame the index has witnessed a shallow retracement as it has already taken 14 sessions to retrace just 50% of its preceding 12 session’s up move (32115-35810). A shallow retracement highlights a robust price structure and a higher base formation

* Despite volatile global cues the index held on to the crucial support area of 34000 signalling strength. Sticking to quality is a mantra to ride such volatile period. Hence, investors should use dips towards 34500-34000 to their advantage to accumulate quality large caps, midcap banking stocks

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