Index opened gap-up, traded in ~130-point range thereafter - ICICI Direct
Nifty :24231
The Indian equity benchmarks ended the session on a very strong note, driven by easing geopolitical tensions and cooling crude oil prices.. Nifty settled the day at 24231 up ~388 points. Market breadth turned positive with an A/D ratio of 6:1. Nifty Midcap, Small cap relatively outperformed the benchmark by gaining 2.50%, each. Sectorally all indices closed in green wherein IT and Realty were the top gainers.
Technical Outlook:
* Index started the day with a positive gap-up and traded within ~130 points range for the rest of the session. As a result, daily price action resulted into bull candle with wicks on both ends, indicating breather after sharp gap-up opening.
* Key point to highlight is that Index has formed higher base above its short term 20-day EMA and decisively closed above its phycological mark of 24000 which has been acting as a hurdle from past three session, indicating resumption of the current upmove. We believe market will continue to move in upward trajectory carrying higher high-low structure and head towards 24800 in the coming weeks. Hence, any decline from current levels should be used as buy on dips strategy as strong support is placed at 23500, being 38.2% retracement of recent upmove (22,182-24,280). Wherein focus should be on accumulating quality stock backed by strong Q4 earning.
* Key point to highlight is that, index has confirmed conclusion of corrective phase by fulfilling prerequisites like close above its last week’s high, sustenance above short-term moving average. In addition to that, faster pace of retracement (as 13 sessions decline entirely retraced back in just 4 sessions), highlights structural turnaround. Hence, formation of higher base amid ongoing consolidation would set the stage for heading towards 24800 in coming weeks
* In the process, volatility would remain elevated on the back of geopolitical development as well as onset of earning season. Hence, we expect stock specific activity to remain in focus.
Our constructive bias is further validated by following observations:
1.In tandem with historical evidences, index following the template of price and time wise correction. Nifty bounced after 16% and 4 consecutive months decline that have typically triggered strong recovery in subsequent two quarters with average returns of 30%.
2.Historically, median geopolitical correction to the tune of 11% offers portfolio building opportunity that garnered 27% in next 3-6 months
3.The Bank Nifty continues to respect its post-COVID rhythm, arresting intermediate corrections within the 20% threshold.
4.Market breadth seen significant improvement as the current reading of % stocks trading above 50- and 200-days SMA has jumped to 63% and 35% compared to last month reading of 15%.
Key Monitorable:
A.Further decline in Crude, US, Dollar Index.
B.Start of Q4 earning season.
Intraday Rational:
* Trend - Higher base formation above 20-day EMA, indicating improving price structure.
* Levels - Buy around 23.6% of last 2 days range and previous day low.
Nifty Bank :56300
The Bank Nifty Index concluded the day on a positive note tracking positive global cues . BankNifty settle the day at 56300 up 1.25%.
Technical Outlook:
* Index opened the day with a strong gap-up and consolidated near its 200-day EMA for the rest of the session. The daily price action resulted into bull candle with shadow on both sides, indicating breather near long-term moving average.
* Key point to highlight is that Index has formed higher base above its short term 20-day EMA and decisively closed above its phycological mark of 56000 which has been acting as a hurdle from past three session, indicating resumption of the current upmove. Going ahead a decisive close above 200-day EMA will open the door for the next leg of up move towards 57200 in the coming weeks. Hence, any decline from current levels should be used as buy on dips strategy as strong support is placed at 54200, as it is confluence of Gaparea (52800-54800) and 38.2% retracement of March-April decline (56786-49954). Wherein focus should be on accumulating quality stock backed by strong Q4 earning.
* On the broader space, the Nifty PSU Bank relatively underperformed the benchmark and closed on a negative note down 0.73%. Index is consolidating above its short term 10-day EMA, indicating buying demand at elevated support base. A sustain and close above 100-day EMA would accelerate the next leg of upmove towards 9100 being 61.8% Retracement of Feb-April26 decline.
Intraday Rational:
* Trend- Higher base above 20-day EMA, indicating revival in upward momentum
* Levels- Buy around 23.6% of last 2 days range and previous day low.
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