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Nifty

• The Nifty started the week on a muted note and gradually drifted downward as the week progressed. As a result, the weekly price action formed an inside bar, indicating a breather after clocking an all-time high 18887 in the last week

• The index is undergoing a slower pace of retracement wherein over the past six sessions it retraced 61.8% of preceding eight session’s up move 18133- 18887, indicating inherent strength. We believe prolonged consolidation (18900-18300) would help the index to cool off overbought conditions and form a higher base that would pave the way to head towards 19400 in January 2023. Post the Fed event, we expect a directional move to accelerate towards 19400 as the broader bullish structure remains intact. Our positive stance on the market is based on following observations: • a) index underwent shallow retracement after breakout from 13 month’s consolidation, validating inherent strength

• b) sharp improvement in breadth over past two weeks. Net number of 52 week high/low from Nifty 500 universe has doubled, indicating improved broader market participation

• c) sharp decline in crude prices (down 10% last week) help cool down worries on the fiscal front and support bullish market sentiments

• d) Dollar Index and US 10 year yields, which have inverse correlation with equities, continue to head lower with lower high-low formation

• Sectorally, BFSI, telecom, PSU, infra, metal, consumption are preferred sectors. Key point to highlight is that ratio chart of Nifty 500/Nifty 100 has turned up from lower band of one year range, indicating outperformance of midcap/small caps. We expect both indices to head towards lifetime highs in coming weeks

• On the stock front, preferred large caps are Reliance Industries, TCS, HDFC Bank, SBI, Ambuja Cement, L&T, Asian Paints, Adani Ports, Tata Steel, Bosch, PI Industries, Siemens while Bharat Forge, PNC Infra, KEC, Rallis, Cummins India, Supreme Industries , Cochin Shipyard, JK Cement, Siyaram silk mills are preferred in Midcap

• Nifty midcap index is sustaining above the triangle breakout area, indicating rejuvenation of upward momentum. We expect it to resolve higher and challenge all-time high with small cap accelerating catch up activity in coming weeks

• Structurally, elongation of rallies along with shallow retracement indicates inherent strength that makes us confident to retain support base upward at 18300 as it is confluence of: a) 80% retracement of late November rally 18133-18887 is placed at 18284 b) as per change of polarity concept January high of 18350 would now act as key support c) Past two week's low at 18365

• In the coming session, index is likely open on a subdued note tracking muted global cues. Post initial dip we expect index to hold key support of 18450 and stage a bounce. Thus, intraday dip towards 18480-18512 should be used to create intraday long positions for target of 18597

Nifty Bank

• The weekly price action formed a high wave candle with small real body and shadows in either direction which maintained higher high -low signalling consolidation with positive bias after sharp up move measuring 15 % in past 10 weeks

• Going ahead, we expect the index to maintain positive bias and head gradually towards 44600 levels in the coming weeks being the 161 . 8 % external retracement of the September 2022 breather (41840 -37387 ) . Dips should be used as a buying opportunity index has strong support placed around 41800 levels

• Going forward, a temporary breather cannot be ruled out as the weekly stochastic after the recent sharp rally is placed at an overbought territory with a reading of 89 . However, it will be confirmed only on formation of a lower high -low sequence . We believe corrective decline towards the breakout area of 41800 levels should be used as a buying opportunity for next leg of up move

• Structurally, in the Bank Nifty rallies are getting faster and stronger while corrections are shallow, underpinning inherent strength highlighting robust price structure

• The Bank Nifty has support at 41800 mark being the confluence of the (a) 23 . 6 % retracement of the last nine weeks up move (37387 -43853 ) placed at 42130 (b) the 10 weeks EMA currently placed at 41860 levels (c) the upper band of the recent range breakout area placed around 41800 levels

• In the coming session index is likely to open on a soft note tracking weak global cues . We expect the index to continue its consolidation with positive bias . Hence use intraday dips towards 43520 -43600 for creating long position for the target of 43840 , with a stoploss of 43410

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