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Nifty : 18857

Technical Outlook

• The index witnessed a gap down opening (19074-19027) and continued to inch southward as the days progressed. The daily price action formed a sizable bear candle carrying lower high low, indicating extended correction

• Going ahead, to pause the ongoing downward momentum index need to decisively close above previous session’s high of 19042. Failure to do so would lead to prolongation of corrective bias wherein strong support is placed at 18700 zone. Meanwhile, on the upside 19300 would act as key hurdle as it is 100 days EMA.

• The broader market is undergoing healthy retracement near 100 days EMA. Key point to highlight is that, the midcap index has logged a breakdown from 6 weeks consolidation while the small cap index retreated from 15 years resistance trend line drawn adjoining CY07-21 high, indicating profit booking after ~50% rally seen during Mar-Oct 2023 amid overbought conditions (monthly stochastic is hovering at 88).

• In a secular bull market, secondary correction is a common phenomenon wherein small cap index has a tendency of correcting 12-15% from swing highs. Thus, we believe ongoing correction would make broader market healthy wherein strong support for Nifty small cap is placed at 11400 as it is implicated target of past six weeks consolidation (13148-12297) coincided with 38.2% retracement of Mar-Oct 2023 rally (8682-13148). Thus, focus should be on accumulating quality stocks backed by strong earnings in a staggered manner.

• The formation of lower peak and trough amid global volatility makes us revise the support base downward for the Nifty at 18800 18700 zone as it is confluence of 52 weeks EMA coincided with previous swing high of 18887 which would now act as key support as per change of polarity concept

Nifty Bank: 42280

Technical Outlook

• The price action formed sizeable bear candle with lower high-low sequence continued below 200-day ema despite oversold readings. In the process index corrected 9.5% from life highs leading weekly and daily stochastics into extreme oversold readings of 10 and 7 respectively. Short term momentum remains downward unless index starts forming higher high-low on sustained basis

• Going forward, immediate hurdle is placed at 43100 and only decisive breach above 43100 would indicate reversal of downward momentum. Further, follow through selling would lead index towards next support of 41500-41800 levels:

• 61.8% retracement of entire rally from March 2023 (38613-46369),

• value of rising 52-week ema which has been held on couple of occasions since CY2020 currently at 42700 (transitory breach usually is sign of capitulation)

• Structurally, Index is in the process of undergoing a retracement of March to July rally over while pricing in various negatives in the process. We believe current decline would lead to a strong higher base formation that would act as a starting point for next leg of structural up trend

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