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Nifty

Technical Outlook

• The Nifty opened with a bullish gap tracking firm global cues and then traded in the 17700-17750 range before rallying to day’s high towards end. The price action formed a bullish candle with rising gap (17624- 17691). In the process it has generated a breakout above the contracting range of the past 14 session’s, with a higher base around the rising 21-day EMA (currently at 17521)

• Going forward, we expect the Nifty to surpass the psychological 18000 mark and eventually head towards 18300 in September 2022 as it is the swing high of January 2022. Meanwhile, level of 17200 is expected to act as a strong support. Meanwhile, any dips owing to global volatility should be used as an incremental buying opportunity. While the midcap index has already approached its January 2022 highs, we expect small caps to catch up in coming weeks. Our bullish stance is validated by following key observations:

• The Nifty has given a conclusive breakout from eight month’s falling channel signalling end of corrective phase. Breakout is well supported by sequential improvement in market breadth as percentage of stocks above long term 200 day moving average rose from end August reading of 51% to 60% indicating broad based nature of rally

• Brent crude has given a breakdown below key support line since CY20 lows. We expect Brent crude prices to head towards $81, which is 80% retracement of this year rally ($65-140). Meanwhile, any bounce back is expected to be short lived

• The Nifty registered a bullish golden crossover in August (50-DEMA crossing above 200-DEMA) implying major shift of momentum from a medium term perspective. In the last decade, in eight out of 10 such instances, the Nifty has generated average 11% return in subsequent three to four months

• Nifty has held 17200 over past three weeks consolidation which is 38.2% retracement of preceding 5 week rally (15800-18000) and expected to act as key support

• In the coming session, index is likely to open on a positive note amid firm global cues. We expect the index to trade with positive bias while maintaining higher high-low. Hence after a positive opening use intraday dips towards 17840-17872 for creating long position for the target of 17959

Nifty Bank

Technical Outlook

• The daily price action formed a strong bull candle with a higher high -low and a firm closing above the 40000 levels signaling continuation of the positive momentum . The index in the process has generated a resolute breakout above last three weeks consolidation range (39800 -37944 ) signaling strength

• Going ahead we expect the index to maintain positive bias and gradually head higher towards the all time high of 41800 levels in the coming weeks being the measuring implication of the last three weeks range breakout (39800 -37944 ) . The index has recently retraced 7 sessions decline (39759 -37944 ) in just 4 sessions highlighting continuation of the up move

• Structurally the recent rally from June lows of 32290 is strongest in magnitude terms since October 2021 while declines are smaller and short lived indicating an improving price structure . Therefore, we recommend to use dips as an incremental buying opportunity

• Bank Nifty continue to relatively outperformed the benchmark index in the last few quarters as can be seen in the Bank Nifty/Nifty ratio chart . Within the banking stocks PSU banking stocks has been resilient and showing relative strength which we expect to outperform going forward

• The index has strong support around 38000 levels as it is the confluence of the last two weeks almost identical low and the rising 10 weeks EMA which has acted as an elevated support during the last two months up move In the coming session index is likely to open on a positive note amid firm global cues . We expect the index to trade with positive bias and head towards 40700 levels . Hence after a positive opening use intraday dips towards 40360 -40440 for creating long position for the target of 40670 and maintain a stoploss at 40240

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