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Nifty:17503

Technical Outlook

* The index recovered 337 points from morning lows (17216) after approaching oversold trajectory on weekly timeframe. Recovery was seen across sectors with cyclicals remaining at forefront. As a result index formed a small Bull candle with lower high-low indicating emergence of buying demand as it approach key support zone. We expect volatility to remain elevated for few sessions wherein dips towards 17100-16900 zone would attract buying demand and higher base being formed

* Key observation is, over past 20 months bull market, there have been three major corrections (refer chart) which measured average 9%. Currently, Nifty has already corrected 7.5% from life highs of 18600. Buying in each of three corrections provided handsome returns for investors as index eventually scaled back to new highs. As we expect markets to maintain this rhythm of corrections, current correction should not be construed negative rather utilise to accumulate quality large and midcap companies as we expect Nifty to find strong buying demand in 16900-17100 zone

* On the higher side 50-day moving average placed at 17700 would act as an immediate hurdle in the current pull backs 

* The broader market indices have bounced off their October lows. Both midcap and small cap indices have maintained rhythm of corrections to the tune of 10% over past 20 months. With 9% correction done, we believe this rhythm will be maintained and these indices will resume their bull trend post a decent higher base formation. Therefore we view ongoing correction as an incremental buying opportunity to ride structural uptrend 

* On oscillator front, daily and weekly stochastics has approached oversold trajectory with reading of 16 and 25 respectively. Such oversold readings favour a buying demand to emerge and support our structural positive stance

In the coming session, the index is likely to open on a positive note tracking firm global cues. We expect the index to continue with its previous session pullback and trade with positive bias. Hence after a positive opening use intraday dips towards 17488-17512 for creating long position for target of 17598

NSE Nifty Daily Candlestick Chart

Nifty Bank: 37272

Technical Outlook

* The daily price action formed a small bull candle with an identical low as that of previous session signaling consolidation after the recent sharp decline

* Going ahead, index holding above last two sessions almost identical lows around (36647 ) will lead to a consolidation in the broad range of 36600 -38200 with stock specific activity . However, failure to hold above the Monday’s panic low will lead to extension of the decline towards 36000 levels being the 50 % retracement of the entire six months up move (30405 -41829 ) . 

*Key observation is that the index since April 2020 has not corrected for more than four -five weeks barring one instance . In the current scenario with four weeks of decline already behind us, we expect the index to maintain the rhythm and form a higher base in the coming sessions

* The overall structure in the index remain positive, hence we believe the current breather should not be seen as negative instead it should be capitalized to accumulate quality banking stocks for the next leg of up move . Buying on dips strategy has worked well on multiple occasions in the last 18 months

* On the higher side Monday’s high 38200 which also coincides with the 50 days EMA (currently placed at 38281 ) is likely to act as immediate hurdle for the index

* The daily stochastic is seen rebounding from the oversold territory with a reading of 22 signaling supportive effort is likely at lower levels in the coming sessions

* In the coming session, index is likely to open on a positive note amid firm global cues . We expect, the index to continue with its previous session pullback and trade with positive bias . Hence after a positive opening use intraday dips towards 37170 -37240 for creating long position for the target of 37490 , maintain a stoploss of 37040.

Nifty Bank Index – Daily Candlestick Chart

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