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Sensex (62918) / Nifty (18688)

The mixed commentary post the Fed outcome on the rate hike led to hesitancy in the US bourses, which impacted the sentiments of our domestic indices. The uncertainty was quite evident in our benchmark indices, as they plunged to lower levels post a mild start tracking the positive Asian market. The breakdown in the BFSI counters led to a correction to the benchmark index and eventually, the Nifty50 index snapped the winning streak and settled below the 18700 level, with a cut of 0.36 percent.

Technically speaking, a sense of timidity post the weakness in the high beta banking space dampened the sentiments, and Nifty once again dragged back within the consolidation zone. On the level front, the immediate support for Nifty could be seen around 18600, followed by the sacrosanct support of 18500 in the near period. At the same time, any further sell-off could dampen the near-term bullish sentiments. On the higher end, the 18750-18800 zone remains the critical hurdle and seems a daunting task for the bulls to breach the same in the comparable period.

Going forward, any relief from the global bourses is likely to boost the undertone and especially the banking space. For the time being, one needs to follow a pragmatic approach with a prime focus on a stock-centric approach, as sector rotation is visible in current situation.

Exhibit 1: Nifty Daily Chart

Nifty Bank Outlook (43444)

The weekly expiry session began with a stable start, with prices consolidating around a key support level in the initial hour. However, as the day progressed, some influential stocks in this sector showed weakness, leading to a price correction that broke below the support levels. This downward movement had a cascading effect on the weekly expiry, resulting in further price correction throughout the session, ultimately closing with a loss of 1.24%, just above 43400.

The banking sector has been disappointing in the past few sessions, as it did not participate in the broader market rally. With yesterday's price action, the short-term charts appear distorted. On the daily chart, prices have fallen below the 20-day exponential moving average (20ema), which had been a strong support level recently. This break below the 20ema does not bode well for the bullish sentiment. Considering yesterday's bearish momentum, we may observe more weakness in the near future, with the next support level around the 50-day simple moving average (50sma) at around 43150, followed by the swing low of 42600 recorded in May. On the upside, the previous support level of 43700 - 43800 will now act as immediate resistance.

Traders should take note that this recent weakness is merely a price correction, and the overall trend remains positive. Any further dips should be seen as buying opportunities.

Exhibit 2: Nifty Bank Daily Chart

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