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Technical Outlook

* After initial pullback index retreated from the psychological mark of 17000 and eventually retested 200 days EMA placed at 16880. The daily price action formed bear candle confined within Friday’s trading range 17187-16747, indicating lack of follow through strength suggesting prolonging consolidation

* The index has retraced less than 80% of Friday’s sharp up move. Going ahead, follow through strength to weekly hammer like candle would be required to extend the technical pullback towards 17300, else extended consolidation in the 17000-16600 range in the vicinity of 200 days EMA. In the process, declines should be utilised to accumulate quality stocks as strong support is placed at 16700- 16600 range which we expect to hold amid ongoing volatility.

* Over past three weeks’ index has corrected 7.5% which hauled stochastic oscillator near oversold territory, indicating impending pullback. Our view of technical pullback is further validated by following observations:

* A) Historically, September has been a volatile month. However, over past two decades, Q4 returns for Nifty has been positive (average 11% and minimum 5%) on 70% of the times. The history favours buying dips from hereon

* B) Indian equities continued to relatively outperform global peers while pricing in many negatives. While most global equity benchmarks have tested June lows, Nifty is 10% away from June lows

* Structurally, over the past five weeks’ index has retraced ~38.2% of preceding nine week’s rally (15185-18000) while absorbing global volatility, signifying healthy retracement amid relative outperformance against global peers that makes us believe, ongoing corrective move would find its feet 16700-16600 zone as it is confluence of:

* A) 50% retracement of June-September rally of 15185-18000

* B) 52 week EMA is placed at 16796

* In the coming session, index is likely to witness gap up opening tracking strong pullback in global equities. We expect index to sustain above the psychological mark of 17000. Thus, cool off towards 17022-17052 should be used for creating long position for the target of 17138

Technical Outlook

*The daily price action formed an inside candle as price action failed to generate follow up to Friday’s strong bull candle and in the process retraced Friday’s rally by almost 61 . 8 % . The retracement after strong Bull candle amid volatility should be seen as incremental buying opportunity

* Banking index has corrected 10 . 5 % from highs of 41840 rendering prices to oversold territory and witnessed buying demand at key support of 37300 -37500 . While short term volatility cannot be ruled out, we expect index to hold this key support and stage gradual pull back towards 39500 mark which is 50 % retracement of recent correction (41840 -37386 )

* Key observation during last week is index corrected 10 . 5 % from life highs over 11 sessions (41840 -37386), equating current price/time decline with its May -June decline (36083 - 32290 ) and made a sharp pullback validating support zone around 37500 levels • Structurally, the index has witnessed a faster retracement as eight month’s decline (41829 -32990 ) was completely retraced in just two and half months highlighting overall positive bias

*The index has support around 37300 -37500 levels as it is the confluence of the 100 days EMA (currently placed at 37640), lower band of rising channel accompanying price action since June lows at 37450 and the 50 % retracement of the major up move (32290 -41840 ) In the coming session, index is likely to witness gap up opening tracking strong pullback in global equities . We expect index to sustain above 100 days EMA . Thus, after initial up move dip towards 38480 -38540 should be used for creating long position for the target of 38830

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