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Nifty

Technical Outlook

• The index witnessed a gap down opening (17758-17682) tracking weak global cues. The daily price action formed a bear candle carrying lower high-low, indicating extended profit booking as intraday pullbacks were short lived

• The formation of lower high-low on the daily chart signifies extended profit booking after 13% rally seen over past five weeks. We believe, the secondary correction is a part of the bull market, hence ongoing correction will help to cool off the overbought conditions and make market healthy. Thus, extended breather from hereon should not be construed as negative instead dips should be capitalised to accumulate quality stocks. In the process, last weeks high around 18000 would act as immediate resistance. Our structural positive stance is validated by following observations:

• a) Nifty has registered a bullish golden crossover (50-day EMA crossing 200-day EMA) at 17660 indicating, structural bullish development from medium term perspective. Since 2009, in eight out of 10 such instances, the Nifty has generated average 11% return in subsequent three to four months

• b) percentage of stocks (Nifty 500) rising above their long term 200-day moving average has seen sequential improvement. From June low reading of 14%, the current reading has jumped to 45% indicating broad based nature of the rally

• c) on the structural front, current development in Indian equities is well supported by strong correlation with developed market indices. S&P500 is on the cusp of breakout from falling channel following similar breakout in Nasdaq index and broader Russell 2000 index, thus signalling end of corrective phase

• The Nifty midcap index is retesting breakout area of falling channel encompassing past eight month corrective phase while Nifty small cap index is hovering in the vicinity of the breakout zone of entire corrective phase falling trend line that augurs well for next leg of up move

• Structurally, prolongation of rallies underpinned by improving market breadth makes us confident to retain support base at 17400 as it is 38.2% retracement of July-August rally (16438-17992)

• In the coming session, index is likely to open on a negative note amid weak global cues. Index to continue with its last two sessions corrective decline as formed lower high-low in daily chart. Hence after a negative opening use intraday pullback towards 17490-17520 for creating short position for the target of 17406

Nifty Bank

Technical Outlook

• The daily price action formed a bear candle with a lower high -low signaling continuation of the profit booking for the second consecutive session after recent sharp up move

• In the ongoing expiry week, we expect index to consolidate in the broad range of 37000 -39500 after a strong rally of 15 % in just five weeks which has led to overbought condition in the weekly stochastic oscillator (currently placed at a reading of 91 ) . We expect buying demand to emerge around the support area of 37000 hence use dips as an incremental buying opportunity

• We believe retracement of the recent up move from here on would make the market healthy and provides incremental buying opportunity

• Bank Nifty has relatively outperformed the benchmark index in the last few quarters as can be seen in the Bank Nifty/Nifty ratio chart . It continues to remain in rising trend forming higher high -low and is seen sustaining above the recent falling supply breakout area joining highs since January 2021 highlighting strength and continuation of the outperformance

• The index has immediate support around 37000 levels as it is the confluence of the 28th July 2022 and the 50 % retracement of the last five weeks up move (34464 -39759 ) In the coming session index is likely to open on a negative note amid weak global cues . We expect index to continue with its last two sessions corrective decline . Hence after a negative opening use intraday pullback towards 38370 -38440 for creating short position for the target of 38030 , maintain a stoploss at 38570.

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