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Nifty

Technical Outlook

• The Nifty started the expiry week with a negative gap (17756-17682) and saw range bound activity. The weekly price action resulted in a bear candle carrying lower high-low for the first time since June 2022, indicating profit booking after the 13% rally seen over the past five weeks that led prices to the overbought trajectory. In the process, Nifty midcap and small caps remained in the limelight as they relatively outperformed the benchmark

• In the upcoming truncated week, we expect healthy retracement towards 16800 levels which should not be construed as a negative rather capitalize dip as buying opportunity. Ongoing consolidation in broad range of 16800-17700 after sharp rally would help oscillators to cool off and set stage for next leg of up move, hence one should adopt strategy of buying dips in quality companies to ride structural uptrend. In the meantime, we expect broader markets to maintain their relative outperformance. Our structural positive stance is validated by following observations: a) the Nifty has surpassed major downward trend line well supported by thrust in advancing stocks volume, signalling end of eightmonth corrective phase, (b) In each of six instances since 2008, reading below 15 in percentage of stocks above 200 DMA (Nifty 500 universe) led to durable bottom, followed by new highs on Nifty. We expect same rhythm to be maintained this time as the indicator saw sequential improvement with current reading of 50 after bottoming out in June 2022 with reading of 14, indicating broad based participation (c) Nifty registered a bullish golden crossover in August (50-DEMA crossing above 200-DEMA) implying major shift of momentum in favour of bulls from a medium term perspective. In last decade, in eight out of 10 such instances, the Nifty has generated average 11% return in subsequent three to four months

• On the broader market front key development observed during last week has been sharp improvement in relative ratio of Nifty MidSmall 400 index against Nifty along with falling channel breakout in Nifty small cap index. Strong thrust in relative ratio signal strong outperformance in broader market space ahead

• Structurally, we expect relative outperformance of BFSI, Auto, Capital goods, PSU and consumption

• Preferred large caps: Reliance Industries, SBI, Titan, Bajaj finance, Tata Motors, L&T while preferred midcaps are City Union Bank, Indian Bank, Mahindra CIE, Indian Hotels, Action Construction, TCI Express, Cochin Shipyard, PNC Infra, Bajaj Electricals, Prestige Estates, KPIT Technologies

• The prolongation of consolidation would make market healthy by cooling off overbought conditions (currently weekly stochastic cooled off to 87 from the previous week’s reading of 97). Hence strong support base at is placed at 16800 as it is the confluence of 38.2% retracement past two month’s up move (15800- 17992) coinciding with rising 50 day EMA at 16900

• In the coming session, index is likely to open gap down amid weak global cues. We expect the index to trade with corrective bias after a gap down opening. Hence use intraday pullback towards 17360-17382 for creating short position for the target of 1726

Nifty Bank

Technical Outlook

• The weekly price action formed a high wave candle with a small real body and long shadows in either direction signaling consolidation after the recent strong up move of 15 % in the preceding five weeks . In today’s session index is likely to open gap down amid weak global cues

• Going ahead in the coming truncated week we expect the index to continue with its current consolidation in the broad range of 37000 -39000 with PSU banking stocks outperforming . Consequently, this will help the index to cool off overbought conditions (currently weekly stochastic cooled off to 87 from 95 levels seen during last week)

• We believe the current consolidation should not be seen as negative instead would make the market healthy and provides incremental buying opportunity in quality banking stocks from medium term prospective

• 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 immediate support around 36500 -37000 levels as it is the confluence of the 200 days SMA placed at 36400 and 61 . 8 % retracement of the recent major up move (34464 -39759

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