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Nifty : 19571

Technical Outlook

* The index started the session on a flat note and gradually inched downward. As a result, daily price action formed a small bear candle carrying lower high-low, indicating breather wherein stock specific action prevailed. In the process, broader market relatively outperformed by gaining 0.25%

* The lack of faster retracement on either side makes us believe index will prolong the ongoing consolidation in the broader range of 19900-19200. The past two week’s breather has helped index to cool off the overbought conditions and make market healthy. Thus, buying dips would be rewarding at current juncture amid progression of ongoing earning season.

* The midcap index has clocked a fresh All time high, highlighting resilience despite profit booking in the benchmark. However, past five months remarkable >30% rally hauled weekly stochastic oscillator in overbought territory while breadth indicator (% of stocks above 200 DMA) has approached overbought condition (placed at 91), suggesting possibility of temporary breather at higher levels can not be ruled out. Thus, focus on accumulating quality stocks in a staggered manner.

* On the global macro front, Brent crude oil and Dollar Index have seen technical pull backs in slower pace after past two months decline. We expect upsides to be capped at $87 and 103.5, respectively. As domestic equity market has an inverse relationship with the aforementioned macro factors, we believe resumption of downward momentum in crude oil and dollar index will fuel the rally in domestic equity market

* We believe, any extended breather from hereon would get anchored around key support of 19200 as it is confluence of:

* a) 61.8% retracement of current up move (18645-19991), at 19160

* b) 50 days EMA is placed at 19206

* c) July month’s low is placed at 19234

Bank Nifty

Technical Outlook

* The price action for the day formed another inside day candle as index oscillated in small range and remained enclosed within Friday’s high -low range (45118 -44520), indicating pause after last week’s decline and supportive efforts in the vicinity of 50 -day ema .

* Nifty Bank index is undergoing a corrective phase over past two weeks after strong 20 % rally from March lows which will help index to form a higher base and make the medium term uptrend healthy . Use dips as buying opportunity

* Going forward, we expect 45500 to act as immediate hurdle in coming week ahead of RBI policy and inflation numbers while only a decisive breach below 44500 may lead to panic reaction towards 43800 in the short term which will present buying opportunity

* PSU banking space is expected to continue relative outperformance

* In the current week, inflation numbers and RBI policy outcome would set the tone for further directional bias

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