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Nifty : 25057

Technical Outlook

Day that was…

Equity benchmark declined for the Fourth consecutive session tracking comments from Fed chair Powell. Nifty settled the day at 25057, down 0.45%. Market breadth was in favor of declines, with an A/D ratio of 1:2 where broader markets underperformed the benchmark. Midcap and Small cap closed on a negative note down 1% and 0.65% respectively. Sectorally, Barring FMCG all indices closed in red. Where, Auto, Realty and Private Bank underperformed.

Technical Outlook:

* Index oscillated 340 points in Wednesday’s volatile session and closed on a negative note. As a result, the daily price action formed a red candle carrying lower-low, indicating breather.

* Key point to highlight is that, Index is undergoing healthy retracement over past four session that hauled Nifty towards 20-day EMA and retested contracting triangle breakout indicating impending pullback as stochastic oscillator is entering in over sold territory after 420 points decline. Such retracements should be considered as healthy and should be used for buying quality stocks. Going ahead, a decisive close above previous sessions high would indicate pause in the down move and will challenge 25500 levels as broader structure remains intact and will eventually pave the way towards 25800 in coming month, wherein strong support is placed at 24700 which is 61.80% retracement of the upmove from (24404-25448) coinciding with past two weeks low.

* Structurally, the rebound from April 2025 low till June 2025 high witnessed shallow retracement as it retraced 38.20% of the entire upmove while within the decline the pullback were limited to the tune to max 800 points the current upmove was >1000 points backed by across sector participation on the back of GST reforms which helped to improve market breadth while maintaining higher peak and trough intact, highlighting inherent strength. All eyes are on the progression of tariff negations. Any announcement on scrapping of additional 25% tariff or lowering reciprocal tariff rates would fuel further momentum in the market. Consequently, focus will shift towards exportoriented Textile, Capital Goods and Pharma stocks.

* On the domestic broader market front, in a bull market scenario, average decline in Midcap and Small cap indices have been 27% and 29%, respectively. Buying in such scenario has been fruitful with >50% returns in subsequent 9-12 months. In the month of April, after 23% and 27% correction in Midcap and small cap, indices witnessed a sharp rebound and made a higher base in the vicinity of 52-week EMA. Currently, Midcap index is shying away 5% from its All Time High while small cap index is 9% away from All Time High. Hence, focus should be on accumulating quality stocks on dip.

* Our positive stance is further validated by following observations:

* a) Sentiment indicator at lows: Historically, rare occurrence of India Vix closing below 11 has eventually garnered double digit returns in subsequent 12 months.

* b) Market breadth: Constant improvement in market breadth highlights inherent strength. Currently, 51% stocks are trading above 50 days SMA while 62% stocks are trading above 200 days SMA compared to one month back reading of 41% and 58%, respectively

Nifty Bank : 55121

Technical Outlook

Day that was:

Bank Nifty closed the day on a negative note and settled at 55,121 down 0.57%. Nifty PSU Bank index has relatively outperformed the benchmark, ending the day at 7,432 down 0.26%.

Technical Outlook:

* Bank nifty started the day on a negative note, failing to exhibit follow-through strength of the previous bull candle. Consequently, the index witnessed profit booking, leading to the formation of a bearish candle with an upper shadow on the daily price action, indicating extended corrective phase.

* Key point to highlight is that Bank Nifty has retraced 38.2% of the preceding up move(53,561-55,853), coinciding with the 100-day EMA, indicating healthy retracement of last leg of up move. Going ahead, a decisive close above the previous session high would help index to resolve above the recent swing high(55,835) and eventually head towards 56800 being 80% retracement of the preceding decline (57628-53578). After favorable GST reforms now, all eyes are on the progression of tariff negations, any positive outcome could act as a trigger. Hence any decline from current level should be viewed as a buying opportunity, as immediate support is placed at 54500 being 61.8% retracement of the current up move (53,561- 55,835).

* Structurally, Over the past 8-weeks of decline, the index has retraced 38.2% of its preceding 16-week, 21% rally, reflecting a slower pace of retracement. The subsequent rebound stands out as the strongest among the last three recovery attempts, reinforcing the view that the resumption of uptrend after slower pace of retracement.

* PSU Bank Index has relatively outperformed the benchmark and closed on a negative note. Index is witnessing formation of higher-high pattern above its cup & handle pattern breakout, indicating sustained bullish momentum and scope for further upside towards its measured move target at 7690. However, immediate support is placed near 7162 being 50% retracement of the current up move (6,730-7,567), coinciding with 20-day EMA.

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