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Nifty :25986

Technical Outlook

Day that was…

Indian equity benchmark close in the red again as rupee sinks to new low of 90. The Nifty closed at 26,032, down 0.45%, Market breadth remained negative with A/D ratio of 1:2. Midcap index shed 1% and Smallcap index declined 0.7%. Sectorally, most indices traded under pressure, with PSU banks, leading the decline, while resilience in IT and a recovery in private banks helped limit the downside.

Technical Outlook:

*  The Index opened on a flat note and drifted gradually lower in early trade and then remained range-bound for most of the session. A late rebound in the last half hour helped trim losses, and the index eventually settled above its 20-day EMA (25968). As a result, daily price action formed a small bear candle with wicks on both ends, indicating near term consolidation phase.

* The index extended its corrective phase for the third consecutive session however it has witnessed rebound near the lower band of the rising channel, coinciding with previous swing-low support (25,800), offering a strong confluence of support. With the RBI's two-day MPC meeting underway and the policy announcement due Friday, are likely to guide market direction in the coming session. Going forward, a decisive close above the previous session's high of 26,066 would signal a pause in the current corrective move. Failure to surpass this level could keep the index in a consolidation range between (26300-25850) in the near term.

* In the process, volatility would prevail tracking global development. Hence, dips should be capitalized as incremental buying opportunity in quality stocks backed by Q2 earning`s as strong support is placed at 25600 being 61.8% retracement of Sept-Oct rally (24588-26104) coinciding with 50 days EMA

Following observations makes us reiterate our positive stance:

* Following the strong up move in Bank Nifty and Midcap index, Nifty clocked a fresh all-time high, while Nifty 500 which carries 90% market cap is trading below just 2.5% from its peak. We expect, catch up activity to gradually pan out in the broader market space in coming weeks.

* December Seasonality: Historical data exhibit that seasonality favour bulls with ~70% success rate wherein average returns have been to the tune of 2.5%

* Sector in focus: We expect BFSI, auto to continue with its outperformance while favourable outcome of US-India trade deal could revive traction in IT, pharma, Textile

Key Monitorable for the next week:

* US and India Tarde Deal: Anticipation of nearing closure of the US and India trade deal continued to buoy sentiment. A favourable outcome could accelerate the positive momentum and attract renewed FII’s inflow.

* RBI Policy

* Brent Crude Oil: Brent Crude: Expect Brent crude to extend decline and head towards lower band of past seven months consolidation range 75-58

* Indian Rupee: Indian Rupee has depreciated and trading around 90.40. Further decline in rupee could temper market sentiment

Intraday Rational:

* Trend- Higher-high and Higher-low pattern for three-consecutive week.

* Levels: Buy on declines near Wednesday low

Nifty Bank : 59348

Technical Outlook

Day that was:

Bank Nifty snapped two days losing streak and settled the session at 59348, up 74 points. In contrast, the Nifty PSU Bank index showed relative underperformance and concluded the session with 3% decline.

Technical Outlook:

* The index opened on a flat and declined in the initial hours. However, supportive efforts from 20 days EMA helped index to recoup intraday losses and settle the session on a flat to positive note. Consequently, daily price action formed a bull candle with lower shadow, highlighting elevated buying demand

* Key point to highlight is that, past ten weeks price action has been captured in a well-defined rising channel. In last session, supportive efforts from lower band of rising channel helped index to maintained the sequence of higher high-low formation. Hence, follow through strength along with a decisive close above previous session high would confirm resumption of uptrend that would help index to challenge the All Time High and head towards 60500 in coming weeks. Hence, traders should adopt buy-on-dips approach in fundamentally strong banking names, particularly those that delivered robust Q2 earnings as immediate support is placed near 58,600, which also coincides with the 50% retracement of the recent upmove from (57157-60114)

* Historically, in the past two decades, there have been 17 instances where Bank Nifty delivered double-digit gains within four months after a decisive breakout above its previous two-month high. The current structure has once again confirmed such a breakout surpassing both the prior two-month high and the previous all-time peak (57,628), indicating a high-probability continuation setup for sustained upside momentum in the months ahead.

* The PSU Bank Index has been a underperformer, as after 13-week it has breached two weeks low indicating pause in upward momentum. The formation of lower-high and lower low indicate extended correction wherein key support is placed at psychological mark of 8000 being 50 days EMA that coincided with 16 months consolidation breakout at 8050 (as per change of polarity concept

* Intraday Rational:

* Trend- Higher-high and Higher-low pattern for three-consecutive week.

* Levels Buy on declines near Wednesday low

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