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Nifty to challenge the psychological mark of 18000…

Technical Outlook

* The Nifty started Monday’s session with a positive gap (17530-17580) and inched northward amid elevated volatility. The index recouped most of last week’s losses and formed a bull candle confined within last week’s bear candle, indicating extended breather amid stock specific action. In the process, broader market indices regained upward momentum and scaled to a record highs

* The index has undergone consolidation over past two weeks after 15% rally (seen during August-September), indicating healthy consolidation. We believe the broader structure remains intact that makes us confident to reiterate our view of Nifty heading towards 18200 in October as it is implied target of past two weeks’ major consolidation (17800-17400). Our constructive stance is based on following observations: a) Despite elevated global volatility and surge in crude oil prices, index shown resilience by maintaining the rhythm of not correcting for more than 4-5% since April 2021 b) We expect IT, BFSI and Energy to lead the rally towards 18200

* We believe the move towards 18200 would be nonlinear as the Q2FY22 earning season kick starts. Thus, extended correction from hereon should not be construed as negative instead dips should be capitalized to accumulate quality stocks

* Sectorally, our structural positive stance on IT, BFSI, Consumption, Auto, PSU remain intact while Metals provide favourable risk-reward

* In large caps we prefer SBI, Infosys, Reliance, Gail, M&M, Siemens, Tata Steel, Titan, Havells while in Midcaps we prefer Trent, Bata, Amber, Bank of Baroda, MCX, IEX, Coforge, JK Paper, GPPL, Pricol, Indiamart, Indocount, Indian Hotel, Safari Industries

* The broader market indices regained upward momentum after two weeks’ breather and clocked a fresh all time, indicating rejuvenation of upward momentum. The current up move in the broader market has been backed by improvement in market breadth as currently ~75% of index components are trading above 50 days EMA compared to August reading of 58% and 44%, respectively, highlighting strength

* Structurally, formation of higher peak, trough on the larger degree chart exhibits strength. Going ahead, we believe any extended breather from hereon would get anchored around 17600 as it is confluence of: a) 50% retracement of past five weeks up move (17254- 17948) b) Last week’s low is placed at 17581

In the coming session, index is likely to open on a soft note amid positive Asian cues. We expect Nifty to endure the positive momentum while maintaining higher high-low formation. Hence, use intraday dips towards 17860-17880 for creating long position for target of 17972

NSE Nifty Daily Candlestick Chart

Nifty Bank: 37775

Technical Outlook

* The weekly price action formed a small bullish candle which remained contained inside previous weak price range signaling healthy consolidation for the third consecutive week after the recent up move of more than 10 % in the preceding five weeks

* In the coming truncated week, we expect the PSU banking stocks to outperform while Bank Nifty continue with its healthy consolidation in the broad range of 36800 -38300 amid stock specific activity ahead of the Q 2 earnings . Lack of faster retracement on either side in the last three weeks signals extended consolidation in the index

* Buying on decline strategy has worked well in the last 16 months, thereby the current consolidation would present incremental buying opportunity in quality banking stocks

* The index has support base at 36800 levels as it is the confluence of the following technical observations :

* 50 % retracement of the current up move (34817 -38337 ) placed around 36600 levels

* The value of the rising demand line joining lows of July 2021 (34115) and August 2021 (34817) placed around 36700 levels

* The last week low is also placed around 36800 levels

* The rising 10 weeks EMA is also placed at 36780 level

* In the coming session, index is likely to open on a flat to positive note amid firm Asian cues . Volatility is likely to be high on account of the volatile global cues . However, we expect index to maintain positive bias while holding 37600 levels . Hence use intraday dips towards 37730 -37800 for creating long position for the target of 38030 , maintain a stoploss of 37620

Nifty Bank Index – Weekly Candlestick Chart

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