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Nifty :23559

Technical Outlook

Day that was…

Equity benchmark continued with its losing streak over fifth consecutive session tracking inflation data, continues FII’s selling and below expectation Q2 earnings. Nifty settled the session at 23559, down 324 points or 1.3%. Market breadth remained in favour of declines with A/D ratio of 1:6 as broader market continued with underperformance. Sectorally, all major indices ended in red weighed down by metal, financials, realty

Technical Outlook:

* The index started the session on a negative note and gradually inched southward as intraday pullbacks were short lived. The selling pressure accelerated on the breach of immediate support of 23800. As a result, daily price action formed a sizable bear candle carrying lower high-low, indicating extended correction

* Nifty has approached the long term 200 days EMA (since April23, on two occasions supportive efforts emerged from 200 days EMA) that coincided with long term rising trend line amid oversold conditions (as daily and weekly stochastic approached in oversold territory), highlighting impending pullback. However, to pause the ongoing corrective phase, Nifty need a higher highlow along with a decisive close above previous sessions high (23870) which has been missing over past five session. Further, breach below 200 days EMA of 23540 would lead to extension of corrective bias wherein key support is placed at 23200 mark.

* On the market breadth front, the % of stocks above 50 days EMA of Nifty 500 universe has approached oversold territory with a reading of 11. Historically, extreme reading in market breadth result into technical pullback in subsequent weeks.

* Structurally, we believe index is undergoing healthy correction which would eventually set the stage for next leg of up move. Since covid lows, average intermediate corrections have been to the tune of 10%. With 10% correction already in place amid oversold conditions we believe, downside remains limited with key support in the range of 23400-23200 as it is confluence of:

* A) 61.8% retracement of Jun-Sept rally (21281-26277), placed at 23200

* B) 52 weeks EMA is placed at 23150

Nifty Bank : 50088

Technical Outlook

Day that was:

Index extended losses over second session in a row tracking sell -off in index heavy weights . Bank Nifty settled the session at 50088 , down 2 % for the day . The PSU Banking index underperformed by losing 3 %

Technical Outlook

* The index started the session on a subdued note and gradually drifted downward as the day progressed as all attempts of pullbacks were sold into . Daily price action resulted into sizable bear candle forming lower high -low, indicating corrective bias . The selling pressure accelerated on the breach of past 2 weeks low of 51000 .

* The index has closed below the lower band of past 6 weeks consolidation around 50200 that coincided with 200 days EMA and key long -term rising trend line (that has been held over past 2 years) . Meanwhile, daily RSI oscillator is witnessing positive divergence, highlighting impending pullback . However, for a meaningful pullback to materialize, index need to decisively close above previous sessions high . Failure to hold 200 days EMA (placed at 49900 ) would lead to extended correction towards 49300 being 52 weeks EMA . Meanwhile, 51400 would continue to act as immediate resistance .

* Structurally, since July -23 , on 4 occasions Bank Nifty has maintained the rhythm of not correcting > 9 % and subsequently undergone base formation for next 3 - 4 weeks before unfolding next leg of up move . In current scenario, with ~ 8 % correction already in place, we expect Bank Nifty to maintain the same rhythm and stage bounce in coming sessions

* The PSU bank has taken a breather after past two weeks up move . We believe, it will form a higher base in the vicinity of 52 weeks EMA and pave the way for next leg of up move

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