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Nifty

Technical Outlook

On expected lines, the Nifty resolved higher and approached 17800 mark. However, profit booking from higher levels led the index to snap its seven session’s winning streak. The daily price action formed a bearish engulfing candle that encompassed Monday’s small candle, indicating a breather after seven sessions up move wherein stock specific action prevailed amid progression of the earnings season

Going ahead, we maintain our positive stance and expect the Nifty to gradually head towards 18100 in coming weeks. However, bouts of volatility owing to monthly derivative expiry coupled with global uncertainty cannot be ruled out. Thus, a temporary breather from here on should not be construed as negative. Instead, dips should be used as buying opportunity. Our positive stance on the market is based on following observations: a) the breakout from three week’s consolidation (17500-16700) along with broader participation and relative outperformance against global peers augurs well for extension of ongoing up move, b) the BFSI space, which carries more than 36% weight in the Nifty, is expected to outperform as rallies are quicker and stronger while corrections are shallow, underpinning inherent strength. Within the banking space, Nifty PSU bank index posted resolute breakout above CY21 highs and past five year down trend line indicating strong structural uptrend. While large caps have seen strong traction, we expect smaller PSU banks to catch-up and witness strong upward momentum in coming weeks, c) US dollar/INR pair has approached key trend line resistance around 83.30 mark. Since 2015 on multiple occasions the pair has reversed lower from this trend line amid extreme overbought readings on weekly timeframe. We expect the US dollar to soften from this key hurdle, which will support bullish sentiment for domestic equities, d) India VIX (which gauges market volatility) continued to drift downward to settle around 17 mark, indicating low risk perception among market participants

Structurally, formation of higher high-low on the weekly chart signifies revival in upward momentum that makes us confident to revise support base at 17300 as it is confluence of: a) 50% retracement of past two weeks rally 16950-17811 b) 50 days EMA is placed at 17320

Broader market indices have bounced after forming a higher base above 100 days EMA. We expect the Nifty midcap and small cap indices to witness catch up activity against Nifty as they are poised to surpass their three week highs, amid advancement of earning season

In the coming session, index is likely to open on a positive note tracking buoyant global cues. We expect index to maintain higher high-low formation amid elevated volatility owing to monthly derivative expiry session. Hence, use dips to create intraday long positions in the range 17810-17840 for target of 17927.

Bank NIfty

Technical Outlook

The daily price action formed a bear candle signaling profit booking after the recent strong up move . The index opened on a positive note however profit booking at higher levels saw the index gave up its gains and closed the session lower by 0 . 4 %

Going forward, we expect the index to maintain positive bias and surpass the all -time high (41840 ) and extend the current up move towards 42900 levels in the coming weeks being the 123 . 6 % external retracement of the recent breather (41840 - 37386 ) . Dips on account of global volatility should not be constructed as negative instead should be used as a buying opportunity

Nifty PSU banking stocks continue to outperform and the PSU bank index has posted a resolute breakout above CY21 highs and past five years down trend line indicating strong structural uptrend . While large caps have seen strong traction, we expect smaller PSU banks to catch -up and witness strong upward momentum

Structurally, in the Bank Nifty rallies are getting faster and stronger while corrections are shallow, underpinning inherent strength . It has recently generated a faster retracement on higher degree as eight month’s decline (41829 -32990 ) was completely retraced in just two and half months highlighting robust price structure

The Bank Nifty has support at 39800 mark being the confluence of the (a) last Thursday’s swing low (b) presence of 20 days EMA at 39776 levels and (c) the 38 % retracement of the last three weeks up move (37387 -41427 ) placed at 39800

In the coming session, index is likely to open gap up amid firm global cues . We expect the index to continue with its positive momentum . Hence after a positive opening use intraday dips towards 41390 -41470 for creating long position for the target of 41730 with a stoploss at 41270

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