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Nifty: 16026

Equity benchmarks extended losses over a fourth consecutive session tracking mixed global cues. The Nifty ended the session at 16026, down 99 points or 0.6%. The market breadth remained negative with A/D ratio of 1:5. Sectorally, financials relatively outperformed while IT, metal, realty extended their underperformance.

Technical Outlook

* The index started Wednesday’s session on a positive note but failed to sustain at higher levels. As a result, it pared initial gains and settled above the psychological mark of 16000. The daily price action formed a bear candle carrying lower high-low, indicating extended breather. In the process, daily cash NSE turnover (| 49500 crore) remained below its one month average of | 57500 crores, indicating lack of market participation

* The index is undergoing a slower pace of retracement on a shorter time frame as over past three sessions it retraced 61.8% of Friday’s sharp up move. The slower pace of retracement signifies inherent strength. Meanwhile, Bank Nifty has merely retraced 38% of recent up move. Going ahead, revived traction in Bank Nifty would provide impetus for the Nifty to surpass the immediate hurdle of 16400 levels and pave the way towards 16800 in coming weeks, else prolonged consolidation in 16400-15700 range. However, bouts of volatility would play a pivotal role amid ongoing global uncertainty that would lead to a non linear move towards 16800. Hence, extended breather from here on should be capitalised on to accumulate quality stocks in a staggered manner as we do not expect the Nifty to breach the key support threshold of 15600. Our earmarked target of 16800 is based on following observations:

* a) 200 day’s EMA placed at 16770

* b) 50% retracement of the entire April-May decline (18115-15735)

* Structurally, over past two decades, on 16 out of 20 occasions despite transitory breach (not greater than 5%) of 52-week EMA (currently 16600) index has generated decent returns in subsequent 3 month and 6 months. In current scenario 5% from 52 weeks EMA is placed at 15700 which has been held on multiple occasions over past two weeks. We expect this rhythm to be maintained as strong support is placed in the range of 15600-15400 as it is confluence of:

* a) 61.8% retracement of CY21 rally b) equality of previous down leg of 14% projected from April high of 18115

* The formation of lower high-low on the broader market indices, indicates corrective bias. Further, breach below May low would lead to prolongation of downward momentum

* In the coming session, index is likely to open on a positive note tracking positive global cues. We expect index to trade with a positive bias amid elevated volatility owing to monthly expiry session. Hence, use intraday dip towards 15980-16012 for creating long position for the target of 16097

NSE Nifty Daily Candlestick Chart

Nifty Bank: 34339

The Bank Nifty relatively outperformed the Nifty for the second consecutive session as it traded in a range with positive bias for the second consecutive session and closed marginally higher by 0 . 1 % on Wednesday amid mixed Asian cues . PSU banking stocks witnessed profit booking as the PSU bank index closed lower by 2 % while the private banking stocks traded in a range with positive bias . The bank nifty closed the session at 34339 levels up by 49 points or 0 . 1 %

Technical Outlook

* The daily price action formed a small bear candle with a long upper shadow highlighting range bound trade for the third consecutive session after last week strong technical pullback .

* Going ahead, we expect index to consolidate and form a base in the broad range of 34800 -33300 levels . Buying on dips towards 33300 -33500 levels should be rewarding as strong support exist around 32000 -32500 levels .

* On the higher side a sustained closing above 34800 will lead to a gradual up move towards 36000 levels in a nonlinear fashion being the confluence of the 200 days EMA (placed at 35948 ) and the 50 % retracement of the entire recent decline (38765 -33002 ) .

* The index has key support placed around 32000 -32500 levels as it is :

* (a) March low placed at 32155

* (b) The value of the rising trendline joining lows of April 2021 (30405 ) and March 2022 (32155 )

* Among the oscillators the weekly stochastic is seen rebounding from the oversold territory and is currently placed at a reading of 17 signaling an impending pullback in the coming weeks

In the coming session, index is likely to open on a positive note amid firm global cues . Volatility is likely to be high on account of the monthly expiry . We expect index to trade with positive bias while holding above 34100 levels . Hence after a positive opening use intraday dips towards 34200 -34280 for creating long positions for target of 34530 , maintain a stoploss at 34090

Nifty Bank Index – Weekly Candlestick Chart

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