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Nifty to consolidate amid stock specific action…

Technical Outlook

• The index extended correction over second consecutive week. However, supportive efforts emerged from long term average of 200 days EMA placed around 16800 that helped index to minimize the losses for the week. As a result, weekly price action formed a Doji candle, highlighting elevated volatility amid stock specific action

• The lack of faster retracement on either side signifies prolonged consolidation in the broader range of 17500-16800 wherein stock specific action would prevail. Only a decisive close below 16800 would lead to extended correction. Over past twelve sessions index has retraced 50% of preceding 19 sessions rally (15671-18114), indicating lack of faster retracement. We believe, the secondary correction amid ongoing Q4FY22 earning season coincided with monthly expiry will make market healthy by cooling off overbought conditions and provide fresh entry opportunity. Thus, dips should be capitalized to accumulate quality stocks in a staggered manner. On the upside, 17500 will be the key level to watch as it is confluence of:

• A) The Monday’s falling gap area (17475-17238)

• B) 50% retracement of April decline (18114-16825)

• Sectorally, Telecom, PSU, Auto to relatively outperform while BFSI and IT to remain stock specific

• Our preferred large cap stocks are Reliance Industries, Axis Bank, Adani Port, NTPC, Coal India, Titan, Tata Motors while in midcap space we like Transport Corporation of India, Coforge, Minda Corp, Gati, Trent, Gujarat Alkalies, Jamna Auto, Phillips Carbon Black, Laurus Labs, Action Construction Equipment, Mazagon Dock Shipbuilders, Redington

• Structurally, the index has undergone healthy retracement as it rebounded after retracing 50% of the entire March 2022 up move coincided with 200 days EMA placed at 16850. The formation of higher trough on the weekly chart signifies elevated buying demand that makes us confident to maintain support base at 16800.

• The broader market indices are consolidating in the vicinity of 50 days EMA. Historically, in a secular bull market intermediate correction towards 50 days EMA help index to cool off the overbought condition and make market healthy. We believe, base formation from hereon would set the stage for next leg of up move In the coming session, index is likely to witness gap down tracking weak global cues. We believe strong support for the Nifty is placed at 16800 which we expect to hold. Hence, after a negative opening supportive efforts from 16800 can not be ruled out. Thus, use dip towards 16830- 16862 for creating long position for the target of 16947

NSE Nifty Daily Candlestick Chart 

Nifty Bank: 36044

Technical Outlook

• The weekly price action formed a bear candle with a lower high -low signaling continuation of the corrective decline for the third consecutive week .

• We expect the index to prolong the ongoing consolidation in the broad range of 35000 -37300 levels amid stock specific activity as indicated by lack of faster retracement on either side

• On the higher side 37300 is likely to act as major hurdle being the confluence of the last Monday’s gap down area and the 50 % retracement of recent decline (38765 -35926 )

• Structurally, the current corrective decline is shaping out as a retracement of strong 20 % rally from March 2022 lows (32156 ) which will help the index to work out of overbought conditions in the weekly time frame . We expect the index to hold above the strong support area of 35000 levels as it is confluence of :

• (a) 61 . 8 % retracement of the entire March 2022 up move (32155 -38765 ) placed at 34800 levels

• (b) The rising 52 weeks EMA is also placed around 34900 levels

• (c ) The recent swing low of second half of March 2022 is also placed around 35000 levels

• Among the oscillators the weekly stochastic is seen cooling off from the overbought territory and is currently placed at a reading of 65 indicating prolongation of the current consolidation . In the coming session, index is likely to open gap down tracking weak global cues . We expect buying demand to emerge around the major support area of 35000 . Hence, use intraday decline towards 35070 -35150 for creating long position for the target of 35430 , maintain a stoploss at 34940

Nifty Bank Index – Weekly Candlestick Chart

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