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Nifty : 19347

Technical Outlook

• The index started the session with a positive gap 19342-19433). However, profit booking in the second half of the session dragged index near days low. The daily price action formed a bear candle carrying higher high-low, indicating extended breather.

• The lack of faster retracement on either side signifies prolongation of consolidation amid stock specific action. We expect Nifty to stage a technical bounce from oversold readings and eventually head towards upper band of consolidation placed at 19600, as it is confluence of 50% retracement of recent decline (19991-19229) coincided with last weeks high of 19584. Past five week’s decline hauled weekly stochastic oscillator in oversold territory (currently placed at 10), suggesting impending pullback. On the downside, strong support is placed at 18900 which we expect to hold. Therefore, buying on dips would be the prudent strategy to adopt. Our view is based on following observations:

• a) The index has undergone slower pace of retracement (Over past five weeks, it retraced 50% of preceding four weeks up move of 18647- 19991) while discounting host of concerns over sticky inflation and rising US Dollar Index, highlighting robust price structure

• b) Dollar Index inched up for sixth week and approached higher band (105) of declining channel which is in place since January 2023. We expect upsides to be capped at 105 and reversal in coming weeks.

• The broader market has relatively outperformed the benchmark. The Nifty midcap, Small cap indices clocked a fresh All Time High. Highlighting point is that, the small cap index witnessed a faster retracement by retracing 15 months decline in just five months, highlighting structural improvement. Although, in the short-term index may undergo breather after sharp rally, small cap space is expected to relatively outperform over next couple of quarters

• The slower pace of retracement has helped index to cool off the overbought condition wherein stock specific action prevailed. Thus, we believe extended correction from hereon would find its feet around key support of 18900 being confluence of:

• a) 80% retracement of current up move (18645-19991), at 18915

• b) as per change of polarity concept, earlier resistance of 18887 will now act as key support

• c) 100 days EMA is placed at 18932

Nifty Bank: 44232

Technical Outlook

• The price action for the day formed a bear candle as prices continued to oscillate in prior weeks range with non directional indicating extended consolidation in the range of 45000 -43500

• Going forward, we expect index to hold key support of 43500 and gradually head higher towards 45000 mark . Sustained close above 45000 would further accelerate gains or else extended consolidation in 43500 -45000 amid positive bias.. Our view is backed by following key observations

• Index has a key support around 43500 as it is 38 . 2 % retracement of entire rally since March 2023 lows (38613-46369) coinciding with June swing low at 43345

• Price wise current decline from highs would equate the last decline before March bottom (3000 points) around 43500

• Time wise, since June 2022 index has not formed more than three to four consecutive bear candles . With four bear candles behind us we expect downward momentum to halt and index to attempt a bounce back

• PSU Banking index is at the cusp of multi year breakout and seen relatively outperforming . We expect this relative outperformance to further amplify in coming months

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