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Cyclicals to drive index higher…

Technical Outlook

* In line with our view, the Nifty resolved higher and achieved our target of 18200 despite elevated global volatility, highlighting relative outperformance in comparison with global peers. The weekly price action formed a sizable bull candle carrying higher high-low, indicating acceleration of upward momentum. Meanwhile, broader market indices maintained their record setting spree

* The last week’s sharp up move helped the index to register a resolute breakout from past three week’s consolidation (18000-17400) with a positive gap, indicating acceleration of upward momentum that makes us confident of revising our target to 18600 levels. Thus, temporary breather from here on should be capitalised on to accumulate quality stocks amid progression of the Q2FY22 earning season. We believe the multi sector participation augurs well for durability of up trend. Further the rejuvenated traction in banking, IT and metal sector would lead the rally towards 18600 as it is confluence of: a) Since April 2020, the index followed a rhythm wherein magnitude of each major rally has been at least 32%, containing in-between corrective phases of 5-6%. Current rally since April 2021 lows of 14151 would achieve measuring implication around 18600, b) The implied target of past three week’s consolidation breakout (18000-17400) is placed at 18600

* We expect BFSI, metals, infra, PSU sectors to outperform

* In large caps, we prefer SBI, Axis Bank, HDFC, Tech Mahindra, L&T, JSW Steel, Havells while in midcaps we prefer Mphasis, Whirlpool, Ashok Leyland, Canara Bank, BEML, KNR Construction, Polycab, GPPL, Graphite India

* The broader market indices continued to outperform the benchmark and scaled a fresh all-time high. The current up move in the broader market has been backed by improvement in market breadth as currently 78% of index components are trading above 50 days EMA compared to August reading of 58% and 44%, respectively, highlighting strength

* Structurally, elongated rallies followed by shallow retracement highlights robust price structure that makes us confident to revise support base upward at 17800 as it is confluence of: a) 61.8% retracement of past five weeks up move (17452-18326) b) 20 days EMA is placed at 17770 which has been held since April 2021

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 39340

Technical Outlook

* The weekly price action formed a strong bull candle with a higher high -low signaling continuation of the uptrend

* The index has logged a resolute breakout from past three week’s consolidation range (38300 -36500 ) indicating acceleration of upward momentum that makes us confident of revising our target to 40500 levels as it is the confluence of the measuring implication of the last three weeks range breakout (38300 -36500 ) and the 138 . 2 % external retracement of the entire major decline of February -April 2021 (37708 -30406 ) placed at 40500 levels

* Despite elevated global volatility and surge in crude oil prices, index shown resilience by rallying to a fresh all time high .

* We expect the index to hold above the immediate support area of 38300 and any breather towards the same provides incremental buying opportunity

* Structurally, the formation of higher peak and trough in all time frames signifies robust price structure, that makes us confident to revise support base upward at 38300 levels as it is confluence of :

* The upper band of the last three weeks’ consolidation breakout area placed around 38300 levels

* 38 . 2 % retracement of the current up move 36877 -39374 is also placed around 38300 levels

* In the coming session, index is likely to open on a positive note amid firm global cues . W e expect the index to continue with its positive momentum while maintaining higher high - low . Hence after a positive opening use intraday dips towards 39430 -39490 for creating long position for the target of 39740 , maintain a stoploss of 39310

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