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Technical Outlook

* The weekly price action formed a sizable bear candle carrying lower low, indicating extended correction as the Nifty breached the lower band of consolidation and drifted towards 17500 amid weak market breadth, contrary to our expectation. Consequently, the index has turned lighter in the face of the Union Budget coupled with US Fed meet scheduled next week

* In the coming week, volatility would remain high ahead of key event of the Union Budget coupled with US Fed meet wherein strong support is placed in the range of 17500-17300, as it is confluence of key long term moving averages like 200 days EMA and 52 weeks EMA. Meanwhile, stochastic oscillator is poised at oversold territory, indicating possibility of pullback can not be ruled out in coming week. Thus, extended correction from hereon should be capitalised on to accumulate quality stocks in a staggered manner. In the process, 18300 would act as immediate resistance on the upside. Following are the points which validate our stance of pullback: a) The Nifty is approaching its price and time wise maturity as it is entering ninth week of correction against nine week’s rally (16748-18887) seen during September 2020 to January 2021 wherein it retraced 61.8%, highlighting robust price structure b) US Dollar index maintained lower high-low on the weekly chart and sustaining below 102, indicating continuance of corrective bias. Indian equities have an inverse correlation with the US dollar index. Thus, weak dollar leads to higher foreign inflows c) Globally major equity markets have remained resilient and settled the week on a positive note. We expect domestic markets to perform in tandem with global peers

* Sectorally, IT, BFSI, auto, Capital & Infra would remain in focus

* On the stock front, we prefer HDFC Bank, Tata Motors, TCS, L&T, Hindalco, LTI Mindtree, Maruti Suzuki, Hindustan Unilever

* Structurally, the index has been undergoing slower pace of retracement, indicating robust price structure. We believe, ongoing corrective move would get anchored around strong support zone of 17500—17300, as it is confluence of: a) 80% retracement of October-December rally 16748- 18887 b) Price parity of December decline (18887-17774) projected from last week’s high of 18201 is placed at 17140 c) Key long term moving average like 200 EMA & 52 weeks EMA is placed at 17500 and 17360, respectively

* Mirroring the benchmark move, broader markets have undergone extended correction. We believe, ongoing correction would help to cool off overbought conditions and form a higher base that would pave the way for the next leg of the up move

Nifty Bank: 40345

Technical Outlook

* The weekly price action formed a sizable bear candle which contrary to our expectations closed firmly below the last six weeks range (43600 -41600 ) indicating extended correction that resulted in index to settle below 100 days EMA (currently at 41383 ) for the first time since July 2022

* Going ahead in the coming week volatility is likely to remain high ahead of the Union Budget coupled with US Fed meet outcome wherein strong support is placed at 39500 -39700 levels which we expect to hold . Thus, we believe corrective decline from here on should be used as buying opportunity in quality banking stocks

* Key point to highlight is that the ongoing secondary correction ( 9 % ) of the last seven weeks has hauled weekly stochastic oscillator near oversold territory with a reading of 24 . Structurally, over past seven weeks, the index has undergone shallow retracement of just 55 % of its preceding 10 weeks rally of October –December (37387 -44151 ) indicating overall positive bias

* The Bank Nifty has key support at 39500 -39700 marks as it is the confluence of the following technical observations : (a) 61 . 8 % retracement of the previous major rally (37387 -44151 ) at 39970 (b) the presence of long term 200 days EMA is also placed at 39789 (c) Price parity with the previous major decline of September 2022 (41840 -37387 ) as projected from the December 2022 all time high of 44151 also signals support at 39500 levels

* The weekly stochastic remain in downtrend, however approaching oversold territory with a reading of 24 signalling supportive effort likely in coming weeks

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