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Nifty :23775

The equity benchmark witnessed profit booking and closed on a negative note to settle at 23775 down 223 points. Market breadth was flat with a A/D ratio of 1:1. Broader markets has relatively outperformed the benchmark with Nifty Mid and Smallcap gained 0.20% each. Sectorally Metals, Pharma, IT were the top gainers while BFSI, Auto and Realty witnessed profit booking

Technical Outlook:

* Index opened on a negative note and witnessed profit booking around 24000 zone coinciding with previous session high. The daily price action resulted into bear candle with wicks on both ends, indicating breather after recent sharp upmove.

* Key highlight is over the past 4 session index has witnessed a sharp rally of 1800 points backed by de-escalation in geopolitical conflicts which has pushed daily stochastic oscillator into overbought zone. Thereby temporary breather at higher levels cannot be ruled out amid overbought conditions, that will eventually make market healthy and set the stage for the next leg of upmove towards 24800 in the coming weeks as it is confluence of 200 days EMA coincided with 61.8% retracement of Feb-April decline (26341- 22182).

* In the process stock specific action and volatility cannot be ruled out ahead of Q4 earning seasons. Therefore, any decline from current level should be utilized as a buying opportunity in stocks with strong Q4 earnings, deescalation of geopolitical conflict and cool-off in crude oil prices as strong support is placed around 23000 being 50% retracement of current pullback (22182-24025) coincided with last week’s high (22941) which would act as immediate support as per change of polarity concept.

* Nifty staged a strong recovery after 16% correction which hauled most of the momentum, sentiment as well as breadth indicators in bearish extreme readings. Historically, these oversold conditions have offered good entry opportunity for constructing medium-to-long-term portfolios. Hence, accumulating quality stock on dips would be the prudent strategy to adopt

Our constructive bias is based on following observations:

a) Historically, since 1996, there have been only 4 occasions where index has given a monthly negative close for more than 4 months in a row, post which index has staged a strong recovery in subsequent quarters. Currently, index corrected over 4 consecutive months

b) Such intermediate correction got arrested in the vicinity of long term 200 weeks EMA (barring 2001,2008, 2020), currently placed at 21930

c) Over past 25 years, there have been 8 occasions where bull market correction got arrested within 15-20% range with an average correction of 17%.

d) With the 16% decline (off Feb high of 26341), Nifty has hauled monthly stochastic oscillator in oversold territory (placed at 20). Further, the divergence on the daily chart.

e) On the Bank Nifty front, since Covid there have been six major correction which anchored around 20-22%. With 19% correction already in place amid oversold conditions, indicating that the downside approaching maturity, in line with historical corrective cycles.

f) In case of geopolitical events, past four decades data suggest that price wise median correction matures around 11%. Buying during such a panic scenario has garnered >25% returns in next 6 months.

Intraday Rational:

* Trend – Profit booking emerged after sharp ~1800 points rally, indicating breather

* Levels - Buy around 38.2% retracement of 2 days upmove.

Nifty Bank :54822

The Bank Nifty Index concluded the day on a negative note tracking mixed global cues and rise in crude oil prices. BankNifty settle the day at 54822 down 1.58%.

Technical Outlook:

* Index opened on a negative note and witnessed profit booking around 50% retracement of prior decline (61678- 49954). The daily price action resulted into bear candle with wicks on both ends, indicating breather after recent sharp upmove.

* Key highlight is over the past four session index has witnessed a sharp rally of 5800 points backed by deescalation in geopolitical conflicts which has pushed daily stochastic oscillator into overbought zone. Thereby couple of days breather at higher levels cannot be ruled out amid overbought conditions, that will eventually make market healthy and set the stage for the next leg of upmove towards 57000 levels being 200-day EMA.

* Therefore, any decline from current level should be utilized as a buying opportunity in stocks with strong Q4 earnings, as strong support is placed at 52800 as it is confluence of Gaparea (52800-54800)and 50% retracement of March-April decline (55554-49954).

* On the broader space, the Nifty PSU Bank has mirrored the benchmark and closed on a negative note. Post sharp 12% rally index has witnessed profit booking around 50-day EMA, indicating breather near key average support. A sustain and close above 50-day EMA would accelerate the next leg of upmove towards 9100 being 61.8% Retracement of Feb April 26 decline.

Intraday Rational:

*Trend- Profit booking emerged after sharp ~5800 points rally, indicating breather

*Levels- Buy around 38.2% retracement of 2 days upmove.

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