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Nifty

Technical Outlook

• The Nifty started the session with a gap down led by weak global cues, only to recover 200 points from early lows. However, profit booking led the Nifty to eventually settle lower amid weekly expiry. Price action resulted in an inside bar, retracing Tuesday’s gains by 50%. Meanwhile midcaps and small caps relatively outperformed

• The Nifty has retraced its recent seven session decline (18000-17166) by over 61.8% in a single session. In coming sessions, key thing to watch will be a faster retracement above August highs of 18000 that will signal end of the ongoing corrective phase. Else, prolonged consolidation in 17200-17800 range is expected to continue amid outperformance of midcap and small caps

• Structurally our positive stance remains intact as we view ongoing consolidation as healthy retracement that will make larger trend healthier and set stage for next leg of up move. Therefore we recommend to use dips amid ongoing consolidation (17200-17800) as incremental buying opportunity. Key support for index is placed at 16800 as it is the confluence of 50% retracement of past two month’s up move (15858- 17992) coinciding with rising 50 day EMA

• 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 eight-month 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 (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

• In the coming session, index is likely to open on a flat note amid muted Asian cues. We expect the index to trade in a range with positive bias. Hence use intraday dips towards 17490-17525 for creating long position for the target of 17609

Nifty Bank

Technical Outlook

• The daily price action formed a bull candle which remained enclosed inside Tuesday price range . The index opened lower, however recovered most of its intraday decline to close marginally lower signaling breather after Tuesday strong up move

• Going ahead we expect the index to continue with its healthy consolidation in the broad range of 39750 -38000 . A close above last three weeks high (39759 ) will open further upside in the coming week

• We believe the current consolidation would make the market healthy and provides incremental buying opportunity in quality banking stocks from medium term prospective . Consequently, this will help the index to cool off overbought conditions (currently weekly stochastic cooled off to 82 from recent high of 95 )

• 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 . It is forming higher high -low and is seen sustaining above the major trend line breakout area . Within the banking stocks PSU banking stocks has been resilient and showing relative strength which we expect to outperform going forward

• The index has major support around 38000 levels as it is the confluence of the last week low and the 38 . 2 % retracement of the previous major up move (34464 -39759 )

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