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Nifty :22119

Technical Outlook

Day that was

Indian equity benchmarks extended their losing streak for a ninth consecutive day, weighed down by global volatility and tariff related uncertainty. The Nifty close at 22,119 down by 5 points. The market breadth remained in favor of declines with the A/D ratio of 1:2. The midcap and small cap segments closed flat. Sector-wise, Realty, Metal and Consumer Durable outperformed while, Oil& Gas, Nifty Bank, Private Bank were the laggards.

Technical Outlook

* Nifty opened the week with a positive gap (22125-22194) and witnessed a sell off, making lower low-high. However, buying demand emerged near 22000 levels, leading to a bounce, and the index closed on a flat note. Consequently, the daily price action resulted into a small bear candle with wicks on either side suggest volatility amid corrective bias.

* Index is likely to open gap down, tracking weak global cues. However, key point to highlight is that within the ongoing correction, which has reached 16%, Nifty has approached the long-term rising trendline (Adj Jun22 low and Mar23 low). However, the index needs follow-through strength above the previous week’s high to confirm a pause in the correction. Given the oversold conditions, we believe investors should refrain from getting anxious at this juncture. The ongoing corrective move is expected to find its feet in the vicinity of key support threshold of 21800-21500 zone, while the earlier support of 22800 would now act as key resistance. Eventually, we expect the index to undergo base formation over the next couple of weeks based on following observations:

* A) The monthly stochastic oscillator is trading in the extreme oversold territory of 9 (lowest since 2002), indicating impending pullback.

* B) The market breadth has approached the bearish extreme as % of stocks (within Nifty 500 universe) above 50 and 200 days SMA has approached their bearish extreme of 7 and 10 respectively in current corrective phase. Historically, such bearish readings have paved the way for durable bottom in subsequent weeks.

* C) The US 10-year bond yields has corrected 7% last month and has formed bearish evening star candlestick pattern on the monthly chart, reinforcing the corrective bias.

* D) The US Dollar index has remained in the vicinity of 107 for the second consecutive month; any further weakness in the dollar would be supportive for emerging markets.

* E) Brent crude has snapped two months up move and sustaining well below $73 mark, which augurs well for the Indian economy and equity markets.

* F) Continued de-escalation of geopolitical tensions is expected to bring additional stability to the equity markets.

* On the broader market front, historical data from the past two decades suggest that in bull market phases, the Nifty midcap and small cap indices typically correct by 27% and 29%, respectively. In the current scenario, we believe both indices are approaching extremes of their bull market correction as Nifty midcap and small cap have already corrected 23% and 27%, respectively, indicating limited downside ahead. Hence, the focus should be on accumulating quality stocks (backed by strong earnings) in a staggered manner.

* The formation of lower high-low signifies corrective bias wherein strong support is placed around 21500-22000 zone as it is confluence of:

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

* b) Rising trend line drawn adjoining subsequent major lows off Jun-22 of 15183 is placed at 22000.

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

Nifty Bank : 48114

Technical Outlook

Day that was

The Bank Nifty continued the selling pressure from previous week and concluded Monday’s volatile session on a negative note, down by 0 .48 % . Meanwhile, the Nifty PSU Bank index mirrored the benchmark move and concluded the session on a negative note at 5631 , down by 0 .37 % .

Technical Outlook:

* The Bank Nifty opened the week on a positive note, however profit booking at higher levels resulted in a sizeable bear candle, indicating continuation of corrective bias .

* Key point to highlight is that, the index is consolidating in a broader range of 49600 -48700 , in which it is trading in a lower high low pattern and a lack of follow through strength on either side signifies prolonged consolidation . Thus, indicating that a breakout on either side of the range would dictate the further course of action, till then the consolidation is likely to continue, amid elevated volatility .

* Structurally, the Bank Nifty has shown resilience by holding above the previous swing low on a closing basis contrary to the Nifty index which is making lower high low . The index is consolidating in the vicinity of the lower band of 2 years rising channel, indicating relative strength . However, a follow through buying above previous weeks high (48972 ) would be required for a meaningful pullback to continue which has been missing since past couple of weeks for the index to move towards the mark of 49600 , being previous swing high, coinciding with 52 -week EMA . On the other side, the near -term support is placed at 46500 mark which is in the vicinity of election days low .

* Mirroring the benchmark index, the Nifty PVT Bank index continued the negative bias from the previous week, resulting in a sizeable bear candle with long lower wick, indicating continuance of corrective bias . Structurally, the index is witnessing slower pace of retracement as over past three 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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