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Nifty :25088

Technical Outlook

Day that was… Equity benchmark staged a significant recovery, bouncing back from the sharp sell-off witnessed during yesterday’s budget day session. Nifty settled at 25088 up 1. %. Broader markets moved in tandem with benchmark with Mid and Small cap index up 0.90% and 0.60%. Sectorally, Baring IT all other indices closed in green wherein Auto, Oil&Gas and Realty were the top gainers.

Technical Outlook:

* Index opened on a flat note and witnessed initial dip; however supportive efforts emerged near previous session low. The daily price action formed a inside bar oscillating within previous session range, indicating breather.

* The index is set to open on a strong positive gap-up, buoyed by the announcement of a landmark US–India trade agreement overnight, which has significantly improved global risk sentiment. With improving momentum, the index is expected to gradually challenge its All-time high of 26,350 in coming weeks. On the downside, the former resistance band of 25,400–25,500 is expected to turn into a strong demand zone, acting as the primary support on any corrective move. Meanwhile, the Budget-day “panic low” near 24,500 remains a distant yet robust long-term base. Hence, any dip from current levels should be viewed as a buying opportunity, with strong support anchored around 25,400.

* Historical analysis of the past three decades, indicates that postBudget periods have delivered an average return of around 12% over the subsequent three months, reinforcing a constructive medium-term outlook.

* Since the post-Covid lows, intermediate corrections on four distinct occasions have found strong footing in the vicinity of the 20-month EMA, each instance followed by a ~20% advance over the subsequent four months. The current 20-month EMA is placed around 24,300, closely aligning with the August swing low of 24,338, thereby reinforcing this zone as a strong structural support going ahead.

* Market breadth has also weakened meaningfully, with the percentage of stocks trading above their 200-day SMA within the Nifty 500 universe declining to 28%. Historically, such contractions in breadth have preceded durable market bottoms, with extreme bearish readings near 15% marking inflection points in the past.

Key Monitorable:

a) RBI Policy

b) US Dollar Index: Past two week’s sharp decline has hauled it at two years low. Breakdown below 96 would result into extended correction.

c) Brent Crude is heading towards 9 months resistance trend line placed at 72. Only a decisive close above 72 would result into extended rally.

Intraday Rational:

* Trend- Supportive efforts emerging around 200-day EMA

Nifty Bank :58619

Technical Outlook

Day that was: Bank Nifty ended on day on positive note at 58619 up 0.35%. Nifty PSU Bank relatively outperformed gaining 0.8%.

Technical Outlook:

* Bank Nifty opened on a negative note and thereafter buying demand emerged from previous sessions low and 100-day EMA .The daily price action formed a bull candle with lower shadow , indicating buying support at lower levels.

* Following the overnight news, Index is expected to bypass its immediate consolidation zones and challenge key psychological barriers of 60,000. Before the trade deal, the index was consolidating in the 58,500-60,000 range. A decisive close above 60,400 confirms a breakout from this multi-week base, opening doors for next leg of upmove in coming weeks.

* Therefore, any dips from current level to be used as buying opportunity as strong support 59000, as it previously acted as a strong support

* Nifty PSU Bank Index formed Hammer candle and closed above 50-day EMA indicating buying demand around 8300 support , the 20- week EMA is also place around this levels.

* Follow through strength above Mondays high (8610)will lead to further pull back towards 9000 levels being 80% retracement of recent decline (9175-8314)

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