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Prolonged consolidation amid stock specific action

Technical Outlook

* The Nifty started the week on a positive note and retested psychological mark of 18000. However, upward momentum remained short lived as profit booking from higher levels dragged the Nifty below 17800 mark. As a result, the index formed an inside bar confined within last week’s sizable bear candle, indicating breather after past two weeks sharp decline (18604-17163). In the process, Nifty midcap and small cap indices relatively outperformed

* The lack of faster retracement on either side signifies prolonging of ongoing consolidation (17600-18200) amid stock specific action as we do not expect Nifty to breach October low of 17500. The bouts of secondary correction after 20% rally is a common phenomenon. In current scenario, index is undergoing secondary correction after 20% rally seen over past three months (15513-18604) which will make market healthy. Hence, ongoing corrective phase should not be construed as negative, instead dips should be capitalised on to build quality portfolio over medium term.

* The Nifty midcap and small cap indices have approached their price/time wise maturity. As both indices maintained the rhythm of not correcting for more than 9-10% and arresting intermediate correction within three weeks. Currently both indices are forming a higher base above 50 days EMA which has been held since June 2020, highlighting inherent strength. We believe, ongoing consolidation would mark broader market healthy. Hence, focus should be on accumulating quality midcaps to ride next rally

* Sectorally, BFSI, Capital goods, Infra & Realty are key outperformers while Auto, Metal present favourable risk-reward setup

* In large caps we prefer SBI, Bajaj Finance, L&T, UltraTech Cement, DLF, Tata Motors, while in Midcaps we like ABB, Bank of Baroda, Federal bank, PVR, Phoenix Mills, Trent, Relaxo Footwears, Indian Hotels, Jindal Stainless, Orient Cement, Action Construction

* Structurally, the formation of higher peak and trough on the larger degree chart signifies robust price structure that makes us believe that ongoing breather would find its feet around 17500 as it is confluence of: a) 50 days EMA is placed at 17585 b) October 2021 low is placed at 17452

In the coming session, the index is likely to open on a positive note amid soft Asian cues. We expect, index to trade with a positive bias while sustaining above Thursday’s low of 17900. Hence, use dip towards 17920-17955 for creating long position for target of 18039

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 39573

Technical Outlook

* The weekly price action formed a high wave candle which remained enclosed inside previous week price range signaling a lack of follow through to previous week sharp decline signifies supportive effort around the 50 days EMA placed around 38400 levels

* Going ahead, we expect the PSU banking stocks to continue with its outperformance while the Bank Nifty to continue with its healthy consolidation in the broad range of 38400 - 40500 

* We believe the current breather should not be seen as negative as the overall structure remain firmly positive, hence the current consolidation should be capitalized to accumulate quality banking stocks for the next leg of up move

* The short term support base for the index is placed at 38400 levels being the confluence of :

* 61 . 8 % retracement of the recent up move (36876 -41829 ) placed at 38620 levels

* the upper band of the recent seven months range breakout area 

* the rising 10 weeks EMA is also placed at 38295 levels

* The weekly stochastic has cooled off from the overbought territory and is approaching its previous major low of August 2021 thus signaling a range bound consolidation in the index in the coming week

* 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 holding above Wednesday low (39412). Hence, after a positive opening use intraday dip towards 39610 -39680 for creating long position for the target of 39910 , maintain a stoploss of 39490

Nifty Bank Index – Weekly Candlestick Chart

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