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Nifty to prolong consolidation amid truncated week…

Technical Outlook

* On expected lines, Nifty regained upward momentum after approaching maturity of price/time wise correction. The buying demand emerged from elevated support base of 15600 that helped index to settle at upper band of past five weeks consolidation (15900- 1500). The weekly price action formed a bull candle with small lower shadow, indicating resumption of primary up trend. In the process, broader market indices clocked a fresh all-time high.

* The index has maintained the rhythm of not correcting for more than 3 consecutive weeks since April 2020, signifying inherent strength. Going ahead, a decisive close above 15900 would open the door toward our earmarked target of 16100. Failure to do so would lead to prolonged consolidation (15900-15500) with stock specific action. Thus, dips from hereon should be capitalised on to accumulate quality stocks amid progression of Q1FY22 earning season. Our target of 16100 is based on :

* a) price parity of post Budget rally (13597-15432), projected from April low of 14151, at 16055 

* b) past two month’s range (15140-14150) breakout target at 16120

* On the sectoral front, we expect BFSI, IT, Infra, Realty and Metals to lead the rally while Auto and Consumption space provides margin of safety at current levels

* Our preferred large cap picks are Axis Bank, Bajaj Finance, Infosys, Asian Paints, Hindalco, Ultratech Cement, M&M while, in midcaps we like Havells, Birla soft, Vardhaman Specialty steel, Mahindra life, Indocount industries, Glenmark Pharma, PNC Infra, Sandhar Technologies, Interglobe aviation

* The Nifty midcap and small cap indices endured their relative outperformance against benchmark. Formation of higher peak and trough supported by strong market breadth signifies inherent strength which augurs well for durability of ongoing up move

* Structurally, the breakout from past one month consolidation has confirmed the strong higher base formation at 15600-15500 zone which we do not expect to breach as it is confluence of:

* a) 80% retracement of June-July rally (15450-15962), at 15550

* b) 10 weeks EMA placed at 15560 In the coming session, index is likely to witness gap down opening tracking weak global cues. However, we expect index to attempt a pullback from key support of 15600. Hence,use intraday dip towards 15650-15673 to create long for target of 15763.

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 35751

Technical Outlook

* The The weekly price action formed a bull candle with a higher high -low and a close at the upper band of the last six weeks range (35800 -34000 ) signalling strength and continuation of the up move on expected lines .

* Going ahead, a decisive close above 36000 would lead to acceleration of upward momentum, else extended consolidation in the range of 34500 - 36000 would continue . We advise to capitalize such breather as an incremental buying opportunity for up move towards 36200 levels in the coming weeks as it is the 80 % retracement of the February – April 2021 decline (37708 -30405 )

* The formation of higher high -low in the weekly time frame gives us confident to revise the support base higher to 34800 levels being the confluence of the following technical observations :

* (a) The 80 % retracement of the current up move (34632 - 35985 ) placed at 34900

* (b) The value of the rising demand line joining major lows since May 2020 is placed around 34850

* (c) The rising 50 days EMA is also placed at 34790 levels

* In the coming session, index is likely to witness gap down opening tracking weak global cues . However, we expect index to attempt a pullback from psychological mark of 35000 . Hence use intraday dips towards 35160 -35220 , for creating long position for target of 35460 , maintain a stoploss of 35040

* Among the oscillators the weekly stochastic has cooled off from the overbought territory and has generated a buy signal moving above its three periods average thus validates positive bias in the index

Nifty Bank Index – Weekly Candlestick Chart

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