Equity market found their rhythm again as the US-India trade deal boosted the market sentiment - ICICI Direct
Nifty :25694
Technical Outlook
Week that was… Equity market found their rhythm again as the US-India trade deal boosted the market sentiment. Nifty gained 3.4% to settle volatile week at 25694. Broader market performed in tandem with the benchmark by gaining more than 3% for the week. Sectorally, Oil & Gas, realty, auto led the recovery while IT and Defense turned out to be laggards.
Technical Outlook:
* The weekly price action formed a sizable bull candle that closed above past two week’s high, highlighting structural improvement that confirms resumption of uptrend.
* Index is likely to open with a positive gap-up tracking positive global cues. The rejuvenation of upward momentum underpinned by improving market breadth signals that the current retracement is not a setback but a healthy reset that is paving the runway for Nifty to challenge the All Time High of 26350 in the upcoming weeks.
* In the process, bouts of volatility amidst geopolitical development, inflation print and fag end of earnings season cannot be ruled out. In this backdrop, any decline should be capitalized to accumulate quality stocks with strong earnings as strong support is placed at 25200 being 61.8% retracement of recent up move (24571-26341) coincided with 200 days EMA. Our positive bias is further validated by following observations:
* The key index heavy weights like financials, oil & gas, Auto (carrying >50% cumulative weightage of Nifty) have regained the momentum which would provide impetus for next leg of up move
* Faster pace of retracement signifies structural improvement as Nifty retraced back past four week’s 6.5% decline in just a single week.
* Since 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
* 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 six 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 of 15% to 42% 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
* Key Monitorable:
* US and India’s Inflation print
* 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- Stochastic in weekly witnessed bullish crossover from oversold territory, indicating positive bias
* Levels- Buy around Fridays hig
Nifty Bank :60120
Technical Outlook
Week that was: Bank Nifty ended the week on a positive note at 60120, up 2.9%. The Nifty PSU Bank relatively outperformed advancing 4.2% respectively
Technical Outlook:
* Bank Nifty gave strongest close in last four weeks after clocking new All time High (61764) indicating uptrend intact. The weekly price action resulted into a long Bull candle with shadow at both ends, indicating breather after faster retracement.
* Index is likely to witness gap-up opening tracking positive global cues. We believe overall structure remains positive bias and with improvement in the sentiment. The index is undergoing healthy consolidation after witnessing faster pace of rear cement that has set the stage to resolve higher towards 61000 in coming weeks.
* In the process, volatility is likely to remain elevated ahead of Inflation data in coming week, 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 Bullish Engulfing candlestick with lower 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- Rebounded from former resistance now turned as support as per change of polarity principal.
* Levels - Buy around Fridays high.
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