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Nifty :26142

Technical Outlook

Day that was…

Indian equity benchmarks closed the session in the red, with the Nifty settling at 26,142. Market breadth remained skewed towards declines, as reflected by an A/D ratio of 1:2, while the Midcap index slipped 0.6%. Sectorally, Metals were the lone outperformers, whereas Oil & Gas and PSU banks emerged as the key laggards..

Technical Outlook:.

* The index opened on a flat-to-positive note; however, the absence of follow-through buying triggered profit-booking near the previous session’s high. Consequently, the daily price action formed a bearish candle with a long upper shadow, signalling selling pressure at elevated levels.

* After a sharp ~500-point rally over the past four sessions, the index appears to be entering a healthy consolidation phase, amid below average turnover of 86k crores(which is 10% below monthly average turnover of 94K Cr). We expect current consolidation would make market healthy, which could help the index retest 26,300 in the near term and eventually pave the way towards 26,700 over the coming month.

* INDIA VIX has declined nearly 20% over the past month and is currently hovering near multi-year lows, which has resulted in to broad-based lower participation. Going ahead, We believe across sector participation would result into broadening of ongoing up move, providing a favourable backdrop for consolidation-led upside in the index.

* Over past two months, Nifty has been defending short-term moving average of 50 days EMA that coincided with last week’s low of 25700, highlighting key support threshold

Our constructive bias is outlined on the basis of following observations:

a) Structurally, the index has resumed uptrend after undergoing a slower pace of retracement. With past three weeks correction it has retraced merely 61.8% of preceding three week’s rally.

b) Santa rally on cards: Historical data since 1995 suggest that, on 77% of the occasions Nifty has delivered positive returns in last 10 days of the year with the average gain of 3%

c) On expected line, USD/INR has retreated from the upper band of rising wedge. Historically, there have been five instances where a retreat in USD/INR from the upper band of this wedge averaging a ~4% decline (with a maximum drawdown of ~7%) over a two-month period was followed by the Nifty delivering average gains of >10% over the subsequent two months. The setup closely mirrors these past inflection points, suggesting the potential for a similar cyclical rhythm to unfold in coming weeks

Key Monitorable for the next week:

* US and India Tarde Deal: The favourable outcome of US and India trade deal could accelerate the positive momentum in the market and pave the way for return of FII’s in the Indian markets.

Intraday Rational:

* Trend- Breather prior four session sharp ~500 points rally, indicating healthy consolidation

* Levels: Buy near the recent gap area (26040-26130)

Nifty Bank : 59184

Technical Outlook

Day that was:

Bank Nifty closed the session down 0.2% at 59,184 on back of mixed global cues. Nifty Private Bank mirrored the benchmark and declined 0.2%.

Technical Outlook:

* The index opened on a flat-to-positive note; however, the absence of follow-through buying triggered profit-booking around previous 2 session’s high. Consequently, the daily price action formed a bearish candle carrying lower high-low, signaling selling pressure at higher levels.

* After a sharp ~690-point rally over the past four sessions, the index witnessed a breather that makes us believe market is undergoing healthier consolidation phase.

* Going ahead follow through strength above previous two session identical highs (59402) will help Index resolve higher towards 60100. A close above 60100 will lead to further upsides towards 60500 in coming months. It has been holding above its 20-day EMA which has been held since October202

* The Private Bank Index has formed higher high lower low on daily chart while consolidating above its 50-day EMA. The stochastic indicators is in rising trajectory suggesting positive momentum. Nevertheless, pullbacks should be viewed as accumulation opportunities, with strong support around 28,274, aligning with the 50% retracement of the 27613– 28,960 rally and the 50-day EMA. Nifty PSU Bank has formed lower high lower low indicating corrective bias but still above its 50-day EMA. The stochastic indicators has generated bearish crossover from overbought territory suggesting short term profit-booking.

Intraday Rational:

* Trend- Lower high-low formation in the vicinity of falling channel

* Levels- Sell near 80% retracement level of previous session range (59480-59542)

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