IGI Logo

Nifty : 19266

Technical Outlook

• The index started the week on a positive note. However, profit booking in the fag end of the week dragged index lower. As a result, weekly price action resulted into small bear candle carrying long higher shadow, indicating extended breather and selling during rallies

• In the coming week, we expect Nifty to stage a technical bounce from oversold readings and eventually head towards upper band of consolidation placed at 19600, which prior weeks high. In the process, we expect Nifty to hold the key support of 18900 as volatility to gradually subside amidst anxiety around US Fed event settles down. We therefore recommend to follow buy on dips approach. 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.

• In the meantime, the broader markets have endured with its relative outperformance as Nifty small cap index clocked a new highs since Jan-22. Structurally, small cap index witnessed a faster retracement by retracing 15 months decline in just five months. 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 18906

• Sectors like BFSI, PSU, discretionary to relatively outperform while IT provides favourable risk-reward

• On stock front, in large cap we prefer Reliance Industries, Axis Bank, SBI, TCS, NTPC, GAIL, BEL, Titan, Marico, Asian Paints, Siemens while in midcaps Persistent, M&M Finance, Indian bank, Federal Bank, MRPL, Tata power, KNR Constructions, Tata communications, EIH, Mayur Uniquoters, Century Ply, KEC, Rallis are looking good

Nifty Bank: 44231

Technical Outlook

• The price action for the week resulted in small bull candle with large upper shadow indicating selling pressure amid intra week rallies around 45000 mark which remains immediate hurdle in the near term . It however formed higher high -low maintaining its rhythm of not correcting for over four weeks in a row, as index is seen attempting recovery from 100 -day ema amid oversold readings on weekly stochastics (13 )

• Going forward, we expect index to extend consolidation in 43500 -45000 aid positive bias . A sustained close above 43500 would indicate further strength . 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

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
SEBI Registration number INZ000183631

Above views are of the author and not of the website kindly read disclaimer