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Nifty :22460

Technical Outlook

Day that was…

Indian equity benchmarks took a breather and closed negative. The Nifty settled at 22,460, down by 92 points. The market breadth was negative in favor of declines, with an A/D ratio of 1:4, as the broader market underperformed, where both the Nifty midcap index and the Nifty small cap index closed on a negative note, down by 1.53% and 1.97% respectively. Sector-wise, barring FMCG, all sectors closed in the red, with Realty, Oil & Gas and PSU Bank underperformed the most.

Technical Outlook:

* The Nifty opened the week on a flat note and, took resistance at 20 DEMA where it encountered profit booking, as a result, the daily price action formed an Inverted hammer candle, indicating breather after three days of up move.

* In Todays session index is likely to witness gap down opening amid weak global cues tracking recession fear in US. A key point to highlight is that, index is taking breather after breaking out from a falling trendline last week, indicating breather after recent up move. Hence, sustainability above 20-DEMA is required for extension of ongoing pullback towards 23000 mark. However, failure to do so may result in a range-bound consolidation between 21800-22650, with stockspecific action dominating the trend. In the process, volatility would prevail tracking tariff related development coupled with US as well as in domestic inflation print. Meanwhile, 21800 would continue to act as key support. Our view of a technical pullback is backed by the following observations:

* a. Over the past three decades, the average drawdown below the 52-week EMA as been 6-7%, followed by >20% returns over the next 12 months. The Nifty is currently ~6% below its 52-week EMA, supporting a potential recovery.

* b. Market breadth recently hit a bearish extreme, as the % of stocks (within Nifty 500 universe) above their 50 and 200 days SMA dropping to 8 and 10 , respectively, during the corrective phase. However, it has now rebounded to 15 and 12, indicating early signs of recovery. Historically, such bearish readings have paved the way for a durable bottom in the subsequent weeks.

* c. Mirroring the Trump phase (2017), the Dollar Index topped out in January and now breached its December 2024 low of 105 and now sustaining below 104 levels, which is favorable for emerging markets like India.

* d. The US 10-year bond yields has corrected ~70 bps from its January highs and has formed a bearish evening star candlestick pattern on the monthly chart, reinforcing the corrective bias.

* e. Brent crude hovering Near 2-Year Lows and is now sustaining below the $70 mark, which augurs well for inflation control and market sentiment.

* f. The monthly stochastic oscillator is in the extreme oversold territory at 12 (lowest since 2002), indicating an impending pullback.

* g. The India VIX is at 14, indicating low risk perception from market participants.

* Structurally, after a five-months, 16% decline, the index has now approached the long-term rising trendline (Adj Jun22 low and Mar23 low) amid oversold conditions. The formation of a lower high-low signifies corrective bias, wherein strong support is placed around the 21800-21500 zone due to the confluence of:

* a) 61.80% retracement in the vicinity of 21500 from the rally (16828-26227)

* b) A rising trendline drawn adjoining subsequent major lows off Jun-22 (15183) is placed at 22000.

* c) The 24-month EMA support is placed in the vicinity of 22000.

Nifty Bank : 48217

Technical Outlook

Day that was :

The Bank Nifty witnessed a breather for second consecutive session where it closed the Monday's session on a negative note at 48 ,217 , down by 0 .58 % . The Nifty PVT Banking index mirrored the benchmark move and settled at 24151 , down by 0 .58 % .

Technical Outlook

* The Bank Nifty opened the day on a subdued note tracking muted Asian cues, where the price action resulted in an inverted hammer like candle, indicating breather in the ongoing pullback .

* The index experienced a falling trendline breakout in last week (drawn adjoining the highs of 17th Feb & 19th Feb), indicating structural improvement . The brief consolidation over the past two sessions, following a 1000 points rally, reflects a healthy pause before further up -move . Going ahead, once the recent swing high of 48840 is taken out the index will resume its technical pullback towards the upper end of the broader consolidation range (49600), coinciding with 52 -week EMA . On the downside, near -term support is placed at 46800 which is 61 . 8 % retracement of Oct -23 to Sept -24 rally (42105 -54467 ) .

* Key point to highlight is that, the Bank Nifty has defended the lower end of the broader consolidation range of 49600 -47800 for three times in last two month . The mark of 47800 will be important to watchout for, sustainability above which will keep the pullback option open in coming sessions .

* Structurally, with 12 % correction already in place the index is witnessing a base formation near the lower band of 2 years rising channel, which is also in the vicinity of 100 -week EMA . The change in market breadth observed in the last week augurs well for the durability of the ongoing pullback and continue the upward momentum in coming weeks .

* In tandem with the benchmark index, the Nifty PVT Bank index is witnessing a slower pace of retracement as over past five weeks it has retraced only 61 . 8 % of preceding 2 weeks up move (23508 -25025), indicating relative outperformance . Going ahead, a close above the previous day’s high will be the initial sign of the resumption in upward momentum, while a follow through buying will lead the index to resolve higher towards 25000 mark, being previous swing high . Meanwhile, immediate support is placed at 23500 , being the recent swing low .

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