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Nifty

• The index started the week with a gap down opening (18496-18402) tracking subdued global cues. However, supportive efforts in the vicinity of 61.8% retracement of past two week’s rally (18133-18887) helped the index to recoup intraday losses and end the volatile session on a flat note. As a result, the daily price action formed a bull candle carrying lower highlow, indicating extended breather amid stock specific action

• We expect prolonging of consolidation (18900-18300) amid stock specific action, which would help the index to cool off overbought conditions and form a higher base. Over the past seven sessions, the Nifty retraced 61.8% of the preceding eight session’s up move (18133-18887). The slower pace of retracement signifies a healthy retracement that would pave the way to challenge 18900 and gradually 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 the following observations:

• a) the index underwent slower pace of retracement after breakout from 13 month’s consolidation, validating inherent strength

• b) sharp improvement in breadth over the 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) helping cool down worries on the fiscal front and supporting 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

• Nifty midcap index is sustaining above the triangle breakout area, indicating rejuvenation of upward momentum. 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

• 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 positive note tracking firm global cues. We expect index to trade with a positive bias and form a higher high-low, indicating pause in corrective bias. Thus, intraday dip towards 18570-18602 should be used to create intraday long positions for target of 18689

Nifty Bank

• The daily price action formed a bull candle which remained contained inside Friday’s price range 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 positive note tracking firm global cues . We expect the index to continue its consolidation with positive bias ahead of the US Fed policy outcome . Hence use intraday dips towards 43660 -43740 for creating long position for the target of 43980 , with a stoploss of 43550

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