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Nifty : 17624

Technical Outlook

• The index started Monday’s session on a positive note and resolved higher. However, minor profit booking in the second half of the session hauled index to falling channel breakout area of 17600. As a result, daily price action formed a small bear candle carrying upper shadow, indicating breather after 865 points rally seen over past two week’s that hauled daily stochastic oscillator in overbought territory (currently placed at 93).

• Going ahead, sustainability above 17600 would be key monitorable as that would confirm revival in upward momentum and gradually pave the way towards 18100 in April 2023. Failure to do so would lead to couple of days breather amid stock specific action that would help index to form a higher base and make market healthy. Thus, any dips from here on should be capitalized to accumulate quality stocks in a staggered manner. Our structurally positive view on the market is further validated by following observations:

• a) The current pullback of 865 points is strongest in magnitude since life highs recorded in December 2022, indicating structural improvement

• b) On the momentum indicator front, Rate of Change indicator is at 5 month high (on multiple parameters), indicating revival in upward momentum

• c) On larger time frame, monthly stochastic around 25 in March was at its bearish extremes making a strong case for meaningful gains over next three months

• d) Current up move was backed by robust market breadth as 80% components of Nifty 500 universe have given positive returns during this period, while percentage of stocks above 200dma has improved from a low of 32 in March to current reading of 43 marking stark improvement

• e) VIX and trajectory of yields, domestically and globally, pointing towards favourable environment for risk assets especially equities

• f) US dollar index trending down with lower high low on monthly charts, a positive for EM equities. Further breakdown below 100 would lead to acceleration of inflows

• We expect broader markets to witness catch up activity as Nifty midcap and small cap indices are sustaining well above their past two weeks high, indicating resumption of upward momentum that augurs well for acceleration of upward momentum in coming weeks

• Structurally, the formation of higher high-low on the weekly chart makes us confident to retain support base at 17100 as it is 61.8% retracement of recent pullback (16828-17638) coincided with the positive gap area of 17126-17204 recorded on 31st March 2023

• In the coming session, index is likely to open on a flat to positive note tracking mixed global cues. The index has rallied >850 points over past two weeks which hauled daily stochastic oscillator in overbought territory (currently placed at 93), indicating temporary breather at higher levels can not be ruled out. Hence, use intraday pullback in April future towards 17750-17782 to create intraday short positions for target of 17665 with a stoploss of 17819

Nifty Bank: 41041

Technical Outlook

• The daily price action formed a bear candle with a lower high -low signalling profit booking after a strong up move of 2000 points in the last two weeks . A couple of day’s of breather can not be ruled out as daily stochastic has also approached overbought territory with a reading of 84 . Healthy retracement of 2 - 3 sessions will make the overall trend healthy

• Going ahead, sustainability above 41200 will lead to up move towards 42000 levels in coming weeks being the confluence of the high of February 2023 and 61 . 8 % retracement of the entire corrective decline (44151 - 38613), else consolidation amid stock specific action

• Bank Nifty/Nifty ratio line continues to trend higher and sustain the above major breakout area signalling continuation of the outperformance

• The index has support at 40000 levels being the confluence the bullish gap up area of 29th March 2023 and the 50 % retracement of the last three weeks pullback (38613 -41274 )

• The weekly stochastic has recently generated a buy signal moving above its three periods average thus supports the overall positive bias in the index

•  In the coming session, the index is likely to open on a flat note amid mixed global cues . Index is expected to trade in a range with corrective bias after last two weeks strong up move . Hence use intraday pullback towards 41250 -42330 for creating short position for the target 41010 , maintain a stoploss of 41440

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