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Nifty to head towards 16100, BFSI, IT to lead up move..

Technical Outlook

* In line with our view, buying demand emerged from key support threshold of 15500 that helped the index to recover last week’s losses, indicating elevated buying demand. The weekly price action formed a bull candle encompassing last week’s real body, highlighting positive bias is intact

* We expect the Nifty to trade with positive bias and head towards 16100 in coming weeks. In the process, we do not expect the Nifty to breach its strong demand zone of 15600-15500. Therefore, any dips from here on would present incremental buying opportunity to construct quality portfolios. The target of 16100 is based on: a) price parity of post Budget rally (13597-15432), projected from April low of 14151, at 16055 b) past two month’s range (15140-14150) breakout target at 16120

* Our constructive stance is further validated by bottom up approach based on following thesis: a) The Nifty IT index continued to show resilience throughout ongoing consolidation phase and is currently placed at life-time high, b) The Bank Nifty has relatively outperformed the benchmark by gaining 2.5% after undergoing slower pace of retracement as over past three weeks it merely retraced 50% of preceding three week’s rally, c) Metal index has once again maintained the rhythm of respecting 10 weeks EMA since May 2020

* On the sectoral front, we expect relative outperformance from IT, banking, auto and metal, which would lead the next leg of up move

* Our preferred large caps are RIL, TCS, Axis Bank, HDFC Life, Tata Steel, Tata Motors, Ultratech Cement while, in midcaps we like LTI, Vardhman Special Steel, Canara Bank, NRB Bearing, KEC International, Indian Hotel, Aditya Birla Fashion & HG Infra

* The broader market indices are undergoing healthy retracement after past eight week’s sharp rally (measuring over 20%) that hauled weekly stochastic oscillator in overbought territory. We believe, a round of consolidation would pave the way for higher base formation and make larger uptrend robust

* Structurally, the higher base formation signifies elevated buying demand that makes us confident to revise support base at 15500 as it is confluence of: a) 61.8% retracement of past four week’s rally (15145-15901), at 15435 b) Past 3 weeks low of 15450

* In the coming session, index is likely to open on a flat note tracking mixed global cues. We expect, Nifty to trade with a positive bias while maintaining higher high-low formation. Hence, use intraday dip towards 15838-15860 to create long for target of 15948

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 35364

Technical Outlook

* The weekly price action formed a bullish engulfing candle signalling resumption of up move after three weeks of breather . Index on expected lines witnessed strong buying demand from the crucial support area of 34000 levels

* Going ahead, we expect the index to trade with positive bias and head towards 36200 levels in the coming weeks as it is the confluence of the 80 % retracement of the entire last three months corrective decline (37708 -30405 ) and the price parity with previous up move (30405 -34287 ) as projected from the recent trough of 32115 signalling upside towards 36200 levels

* In a smaller time frame the index has witnessed a shallow retracement as it has taken 13 sessions to retrace just 50 % of its preceding 12 sessions up move (32115 -35810 ) . Followed by a sharp pullback in the last week as it has retraced almost 80 % of its 11 sessions decline (35810 -33908 ) in just five sessions . A shallow retracement followed by a sharp pullback highlights resilience

* The formation of higher high -low in the weekly time frame gives us confident to revise the support base higher towards 34500 being the confluence of the following technical observations :

* (a) The 61 . 8 % retracement of the last five sessions up move (33908 -35491 ) placed at 34500 levels

* (b) The value of the rising demand line joining lows of April 2021 and May 2021 is placed around 34500 .

* (c) The rising 50 days EMA is also placed at 34317 levels

* In the coming session, the index is likely to open on a flat to positive note amid firm global cues . W e expect the index to trade with positive bias while maintaining higher high -low . Hence use dips towards 35250 -35320 , for creating long position for the target of 35560 , maintain a stoploss of 35140

Nifty Bank Index – Weekly Candlestick Chart

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