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Nifty : 16100

Technical Outlook

• The index started the truncated week with a negative gap and gradually drifted southward as unscheduled rate hike announcement by RBI followed by Fed rate hike dented the market sentiment. As a result, contrary to our expectation Nifty breached key support of 16800 accelerating further decline amid weak global cues and spike in volatility. The weekly price action formed a sizable bear candle carrying lower high-low, indicating extended correction

• Going forward, key support is placed at 16100 levels being 80% retracement of March rally. Only a decisive close below 16100 would lead to extended correction towards march low of 15700. However, we observe that past four weeks corrective move hauled daily and weekly stochastic oscillator in extreme oversold territory (currently placed at 8 and 16, respectively). In earlier occasions, during CY18- 20, after approaching such lower reading below 20, markets have witnessed technical pullback. Thus, we advise traders to refrain from creating aggressive short position in current highly volatile scenario. Instead, one should capitalise dips to construct portfolios in quality stocks in a staggered manner. Meanwhile, immediate upsides are capped at breakdown area of 16800

• Historically, 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 200 days EMA will mature at 15700

• Key monitorable in coming weeks will be cool off in domestic and global volatility which has inverse correlation with equities. Thus cool off in volatility coupled with oversold conditions will pave the way for technical pullback

• On the sectoral front, BFSI, Telecom, IT sectors offer favourable riskreward proposition

• The broader market indices behaved in tandem with benchmark. Currently, Nifty midcap, Nifty small cap indices are hovering around 52 weeks EMA. We believe, prolonged consolidation from hereon would help weekly stochastic oscillator to cool off amid ongoing Q4FY22 earning season. Going ahead, the formation of higher highlow on the weekly chart would confirm pause in downward momentum In the coming session, index is likely to witness gap down tracking weak global cues. The breach of Friday’s low signifies extended correction. Hence, after a negative opening use pullback towards 16320-16352 for creating short position for the target of 16231

NSE Nifty Daily Candlestick Chart

Nifty Bank: 34591

• Index contrary to our expectations breached the support area of 35000 and in the weekly price action formed a sizable bear candle with a lower high -low signaling continuation of the corrective decline

• Key support for the index is placed at 33500 levels being the 80 % retracement of the entire March up move . Only a decisive close below 33500 would lead to extended correction towards march low of 32155 . Immediate upsides are capped at 36000 levels

• Index has stiff hurdle around 36000 levels being the confluence of last Thursday high and the 38 . 2 % retracement of current decline (38765 -34353 )

• The formation of lower high -low on the monthly chart signifies extended correction . However, the index has witnessed a shallow retracement of its preceding up move and has already taken five weeks to retrace just 61 . 8 % of its preceding four weeks up move (32156 -38765 ) . A shallow retracement signals a higher base formation . The index has support around 33500 levels as it is confluence of :

• (a) 80 % retracement of the entire March 2022 up move (32155 - 38765 ) placed at 33500 levels

• (b) bullish gap area of 10th March 2022 is also placed around 33700 levels

• Among the oscillators the weekly stochastic is currently approaching oversold territory with a reading of 20 signaling a pullback likely in the coming weeks In the coming session, index is likely to open gap down amid weak global cues . The index is seen forming lower high -low signaling corrective bias . Hence after a negative opening use intraday pullback towards 34390 -34460 for creating short position for the target of 34130 , maintain a stoploss at 34580

Nifty Bank Index – Weekly Candlestick Chart

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