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Nifty : 21517

Technical Outlook

Day that was…

Equity benchmark extended breather over second consecutive session tracking muted global cues. The Nifty settled the session at 21517, down 148 points or 0.7%. However, market breadth turned positive with A/D ratio of 1.2:1 as Nifty midcap index outperformed by gaining 0.3%. Sectorally, PSU Banks, Oil & Gas, realty while IT, metal took a breather

Technical Outlook

• The follow through to yesterday’s decline resulted into a bear candle carrying lower high-low, indicating corrective bias.

• We believe, ongoing breather after 16% rally seen over past two months would make market healthy and paved the way towards psychological mark of 22000 in the coming weeks. Key point to highlight is that, % of stocks above 200 days EMA have surpassed 90% mark indicating overbought conditions. However, we expect positive momentum would continue as long as index maintains higher high-low on weekly chart. Thus, ongoing breather ahead of Q3 earning season should not be construed as negative instead buy on dips strategy should be adopted as we believe strong support is placed at 21300. Our positive bias is further validated by following observations:

• A) The formation of hammer like candle on the daily chart post slower pace of retracement signifies impending pullback

• B) the broader structure of global market becomes more supportive as US and European indices are coming out of two years of consolidation

• C) Declining yields, and stable currency (INR/USD) along with strong institutional flows would act as tailwinds

• The elongation of rallies followed by shallow retracement exhibits inherent strength that makes us confident to retain support base at 21300 as its is confluence of 61.8% retracement of past six sessions up move (20977-21834) coincided with last week’s low of 21329

Nifty Bank: 47705

Technical Outlook

Day that was :

The Nifty Bank index extended losses over fourth consecutive session amid weekly Banknifty expiry . Nifty Bank index closed the session at 47705 , down 57 points for the day . Meanwhile, Nifty PSU Bank index clocked a fresh All Time High of 5841

Technical Outlook :

• The index recouped most of intraday losses and settled the session near days open . Consequently, daily price action resulted into a hammer like candle, indicating impending pullback . Further, Index needs to form a higher high -low to indicate pause in current profit taking spell . Ongoing breather would make market healthier from medium term perspective

• Going ahead, we expect index to gradually head towards 49000 levels in coming weeks . However, taking note of overbought readings (weekly stochastics of 92 ) we do not rule out marginal profit taking, hence recommend to adopt buy on dips strategy

• Meanwhile, we revise short term support to 47000 being last week’s lows that coincide with rising 20 -day ema which we expect to hold

• Structurally, index formed a higher bottom after strong breakout above 46300 levels in faster time highlighting robust price structure and elevated buying demand . Further, participation of both private/public sector banks make the rally more dependable with large caps being in focus

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