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Nifty :25642

Technical Outlook

Day that was… Equity benchmark took a bit of a breather after a strong three-day rally. Nifty settle the session at 25,642 down 0.50%. Market breadth was in favour of decline with an A/D ration of 1:2. In broader markets, Small cap index has relatively underperformed the benchmark down 1.30%. Sectorally, baring PSUs banks, all other indices closed in red wherein decline was largely led by Metals and IT.

Technical Outlook:

* Index opened on flat to negative note and traded within previous session through out the session. As a result, the daily price action formed a inside bar with ~170 points narrow range, indicating range bond activity.

* Today, index is likely to witness subdued opening tracking weak global cues. Key point to highlight is that, following the rapid retracement, the index has entered a phase of healthy consolidation within the preceding upmove, holding firmly around the 50-day EMA, signalling structural stability. We believe, the index is well-positioned to extend the ongoing up trend and gradually retest its all-time high of 26,350 in the coming weeks.

* In the process, bouts of volatility cannot be ruled out ahead of RBI policy and US-Iran nuclear talk schedule tomorrow wherein any dip from current level should be used to accumulate quality stocks that are backed by strong earnings, wherein 25,000-25,200 zone is expected to evolve into a strong demand area, as it coincides with the 80% retracement of the recent up-move (24,571-26,341).

* On the broader market front, Nifty midcap once again defended 52 weeks EMA over last nine months while Small cap index witnessed supportive efforts from lower band of since months falling channel. The improving market breadth would result into broadening of the ongoing rally.

• Market breadth has been witnessing improvement, as the percentage of stocks trading above their 50 days SMA has bounced from bearish extremes to ~40% levels while percentage of stocks above 200-day SMA within the Nifty 500 universe enhanced to 38%. Historically, such contractions in breadth have preceded durable market bottoms, with extreme bearish readings near 15% marking inflection points in the past. Our positive is stance is further validated by following

observations:

* Historical analysis of the past three decades, indicates that postBudget Nifty has delivered an average return of around 10% 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 five to six 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

Intraday Rational:

* Trend- Index is undergoing healthy retracement of recent sharp up move • Levels- Buy around 50% retracement of current upmove (24728-26320

Nifty Bank :60064

Technical Outlook

Day that was:

Bank Nifty ended the session on a marginally negative note at 60064, down 0.3%. The Nifty PSU Bank relatively outperformed advancing 0.4% respectively.

Technical Outlook:

* Index continues to firmly hold above its prior gap area support and consolidate in the range (60390-59890) for past two sessions. The daily price action resulted into an inside bar over second consecutive session that confined within Tuesday broad range, indicating breather after a previous session sharp up move.

* Today, index is likely to start the session on a muted note tracking weak global cues. However, overall structure remains positive and current slower pace of retracement would make market healthy and set the stage to resolve higher and sustain above its prior swing high of 60,400 on closing basis, leading to acceleration of upward momentum towards 61000 in coming weeks as the sentiment remains overwhelmingly positive on the back of the trade deal. We expect, the index to continue its upward trajectory within a well-defined broader structural framework.

* Hence, any corrective dips from current levels should be viewed as buying opportunities. A strong demand zone is placed around 58,500, which aligns with the 80% retracement of the recent upmove.

* Meanwhile, the Nifty PSU Bank Index also formed a bull candle with higher high-low range and close above its 20-day EMA, reinforcing near-term strength. Going ahead, the index appears well positioned to challenge the 9,170 level in the coming weeks

Intraday Rational:

* Trend- Index is undergoing healthy retracement of recent sharp up move

* Levels - Buy around 50% retracement of current upmove upmove(58151-61300)

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