Indian equity benchmarks closed the week on a positive note despite heightened geopolitical conflict in Middle East - ICICI Direct
Nifty : 25112
Technical Outlook
Day that was…
* Indian equity benchmarks closed the week on a positive note despite heightened geopolitical conflict in Middle East. The Nifty settled at 25112 up 1.59% for the week. The Market breadth was in favor of advances, with an A/D ratio of 2:1. Sectorally, Auto IT and Bank Nifty outperformed, while, Pharma, Metal and PSU Bank underperformed for the week.
Technical Outlook:
*Friday’s sharp up move helped index to reclaim 25000 mark. The volatile week eventually resulted into the formation of Inside bar, signaling range bound trading. Key point to highlight is that, FIIs have turned net buyers for the week despite ongoing global uncertainties, with a significant inflow of Rs.8,709 crore, indicating, gradual return of confidence among foreign investors in the Indian market.
* The Nifty is likely to witness gap down opening tracking escalating geopolitical issues over the week. However, despite ongoing geopolitical volatility following observations are important to watchout for which would provide cushion to the market:
* A) de-escalation in geopolitical issues
* B) Cool off in crude oil prices
* C) Amidst geo-political concern, Nifty managing to hold 24500 on closing basis will keep pullback option open.
* D) Further weakness in US Dollar index
* E) Bilateral Trade Agreement between India and US
* Key thing to highlight is that, over past five weeks, Nifty has been consolidating in 700 points range wherein it managed to defend the 24500 on multiple occasions despite escalated geopolitical issues. Further, index heavy weights regained upward momentum as RBI eased project financing norms that boosted market sentiment. Historically, we have observed that such geopolitical scenarios result into near term volatility wherein possibility of knee-jerk reaction cannot be ruled out. Hence, we advise dips should be capitalised to buy quality stocks from medium to long term perspective. Nifty is forming a higher bottom above 50-day EMA (24480) and looks poised for a breakout from five weeks of consolidation (24500-25200) that would open the door for 25500 in coming weeks. Meanwhile, 24500 would continue to as key support zone.
* Structurally, the index is witnessing shallow retracement as over past five weeks it merely corrected 3% of preceding six week's rally (15%), indicating robust price structure that is helping index to set the stage for next leg of up move.
* On the broader market front, the Nifty midcap index has taken a breather after 28% rally off April low and now approaching lower band of rising channel that coincided with 50 days EMA. In addition, since April lows, Midcap index has not corrected >6% while on the weekly chart it has not closed below its previous week’s low. In current scenario, despite ongoing volatility, midcap index has been maintaining the same rhythm.
*The key support threshold of 24500 for the Nifty is based on lower band of past five weeks consolidation coincided with 50% retracement of recent rally (23935-25222) and 50-day
Nifty Bank : 56253
Technical Outlook
Week that was :
*The Bank Nifty closed the week on a positive note, despite heightened geopolitical conflict in Middle East . The index settled at 56 ,253 , up 1 .31 % for the week . The Nifty Pvt Bank index mirrored the benchmark, closed on a positive note at 27979 , up 1 .64 % .
Technical Outlook
* The Bank Nifty started the week on a positive note, after the initial up move, profit booking emerged in the vicinity of gap zone and traded in the range of 56000 to 55400 for the next three session and broke the upper range in Friday’s session decisively closing above the psychological mark of 56000 and made a Inside bar, signaling range bound activity .
* Over the weekend, escalated geopolitical issues would result into gap down opening in Bank Nifty . However, the index is currently forming higher base above 20 days EMA, highlighting strength that would open the door towards the upper consolidation which is placed at 57049 . While, strong support is placed at 55000 , which coincides with lower consolidation zone . Any, decline from current levels would offer incremental buying opportunities . Key point to highlight is that, over past five weeks Bank Nifty has managed to close above last week’s low . In current scenario, despite ongoing geopolitical worries it has maintained the same rhythm by closing above its last weeks low, indicating uptrend is intact . Since April supportive efforts are emerging in the vicinity of 20 -day EMA indicating inherent strength .
* Structurally, the Bank Nifty is witnessing an elongation of rallies followed by shallow retracements, signifying a robust price structure . The April months up -move of 14 % is stronger compared to the March month’s 9 % rise . Additionally, the declines are becoming shallower, with the April months decline being 4 . 6 % versus 5 . 4 % in March 2025 after recent 7 % upmove and decline of 3 % we expect same rhythm to continue .
* Underperforming the benchmark the PSU Bank index witnessed second week of profit booking where it took support at 50 -day EMA and managed to close the week above previous weeks low indicating buying demand emerged at lower levels . The index broke out from an eleven -month falling trendline on 19th May and, since then, has been forming a higher -high -low structure on weekly which is intact, indicating uptrend is intact . While the Bank Nifty is trading ~ 1 % below its all -time high, whereas the PSU Bank index is still trading ~17 % below its all -time high, presenting a compelling case for a catch -up move . Meanwhile, immediate support on the downside is placed at 6 ,700 , which is the 38 .20 % retracement of the rally from 7th April 2025 to 9th June 2025 coincided with 50 -day EMA .
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