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Nifty

Technical Outlook

• The Nifty pared initial gains after approaching near our target of 18500. Subsequently, buying demand from lower band of consolidation placed around 18000 helped index to recover some of intra-week losses. As a result, our buy on dips strategy fared well. The weekly price action resulted into high wave candlestick pattern carrying small real body with shadows on either side, indicating elevated volatility. In the process, stock specific action prevailed amid progression of earning season

• Going ahead, we expect Nifty to prolong the ongoing consolidation in the 18500-18000 range amid monthly derivative expiry week. Structurally, this consolidation will help index to form a higher base. In the process, we expect small cap space to witness catch up activity. Thus, buy on dips would continue to be the prudent strategy to adopt. Structurally, our positive stance is further validated by following observations:

• A) Emergence of buying demand from lower band of consolidation (18000) coincided with 20 days EMA, signifies robust price structure

• B) The Bank Nifty has shown relative outperformance and maintained a higher high-low at ALL Time High. The resilience in Bank Nifty (which carries 38% weightage in Nifty) displays inherent strength

• C) we expect Nifty small cap space to witness catch up activity as many small cap stocks which are not part of small cap index are coming out of large consolidations. Highlighting point is that, the Nifty midcap index is just 2% away from its All Time High whereas Nifty small cap index is still 18% away. Thus, quality small cap stocks should be in focus

• D) FII’s inflows have remained sturdy in May which is a key supporting factor for acceleration of structural uptrend ahead

• Sectorally, we remain positive on BFSI, Auto, IT, Infra

• On stock front, in large cap Axis Bank, Infosys, Bharti Airtel, United Spirits, Tata Motors, DLF, Marico are in focus while in midcap Sundaram Finance, AIA Engineering, Mahindra CIE, Coforge, Exide Industries, PCBL, Kajaria Ceramics, PNC Infra, Elgi Equipment remain in focus

• The broader market indices continued with their relative outperformance while maintaining higher peak and trough, indicating elevated buying demand. Thus, broader market should be in focus as we approach the fag end of the earning season

• Structurally, formation of higher high-low on the monthly chart signifies elevated buying demand that makes us confident to keep support base at 17800 as it is 38.2% retracement of Mar-May up move (16828-18458) coincided with 50 days EMA placed at 17873

Nifty Bank: 43969

Technical Outlook

• The weekly price action formed a high wave candle signalling pause after recent strong up move of 15 % points in the last eight weeks

• Going ahead, index is likely to consolidate and form a base in the coming week amid higher volatility on account of the monthly expiry . Only a firm closing above the all -time high (44151 ) will open further upside towards 44900 levels in coming weeks . However, the up move towards 44900 would be in a non -linear manner as bouts of volatility after last two months strong up move cannot be ruled out, hence dips should be used as a buying opportunity

• Key observation in the weekly chart of Bank Nifty is that it has witnessed a faster retracement of the 14week decline (44151 -38613 ) during Dec22 -Mar23 in just seven weeks . Faster retracement in just half the time interval indicating structural improvement from medium term perspective

• On relative terms, Bank Nifty continues to outperform the Nifty . The Bank Nifty/Nifty ratio line continues to trend higher and maintain higher high -low signalling extended period of outperformance .

• The index has key support at 42700 levels being the confluence of the recent low and the 38 . 2 % retracement of the recent up move (39610 -44151 )

• Weekly Stochastic is seen reacting lower from the oversold territory, consolidation in the coming weeks will help the index to cool off the overbought condition

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