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Nifty : 23873

Technical Outlook

Day that was ..

Equity benchmark extended losing streak over fourth session in a row as rising crude oil dented the market sentiment. Nifty settled the session at 23873, down 41 points. Howver, market breadth tuned in favour of advances with A/D ratio of 1.7:1 as Midcap, smallcap gained 0.4% and 1.3%, respectively. Sectorally, realty staged a strong rebound while IT extended breather.

Technical Outlook :

• Post gap up opening lack of follow through strength dragged index lower, finally settling the session near day’s low. Daily price action resulted in a bear candle carrying higher high-low, indicating extended breather.

• Nifty failed to capitalize the up move despite gap up opening. Consequently, failed to close above previous session’s high over seventh consecutive session, indicating near term weakness. However, broader market remained in limelight yet again. Therefore, focus should be on the broader market while Nifty witness subdued traction. Going ahead, Key support is placed at 23600 being July low while to pause the ongoing corrective phase, a decisive close above previous session’s high 24025 would be required.

• Over past five weeks, Nifty midcap and smallcap index have corrected 3% and 2% respectively, compared to Nifty which has corrected ~4%. Further, with recent correction Nifty has been sustaining below its cluster of short, medium and long-term averages while in contrast midcap and smallcap indices respecting upward sloping 50- and 20-days EMA, that further reaffirm broader market strength.

• Structurally, it is important to highlight that the index has formed sequential higher bottoms off April low (22182). Each higher base has formed a peculiar pattern of arresting intermediate correction around 61.8% to 80% retracement of prevailing uptrend. The current ~990 points pullback precisely align with the structural rhythm, retracing 80% of Jul-Aug 1150 points rally. We expect index to maintain the same rhythm and form a higher base in coming weeks.

• Past two decades of historical data suggest that September has been the volatile month. However, such volatility has paved the way for direction move in subsequent months

• Smallcap index has logged an impressive ~35% rally off April low and reclaimed its all time high after 18 months. The historical data suggest that this is the initial leg of multi-year secular bull run rather than an overextended technical move. We believe that current up move has laid the foundation for a secular up move Our bullish outlook on the broader market is anchored by following key observations:

• A) Major corrections of ~35% or more have historically marked the beginning of a fresh market up-leg rather than the end of the broader bull cycle

• Post such correction, uptrends have sustained for subsequent ~20–22 months on average, with significant rally in subsequent year

• With current rally (~35%) only five months of its expansion, history suggest that we are just starting the secular up move, where the largest gains are yet to unfold

• After Brent crude peaked at $120 in March, intermediate rallies have exhausted around the 80% retracement of prevailing decline. Following the historical rhythm, the current 80% mark is placed at 97 which would be the key level to watchout for.

Intraday Rational :

• Trend – Supportive efforts emerged from 80% retracement of last up move

• Levels – Buy around Wednesdays lows

Nifty Bank : 57380

Technical Outlook

Day that was :

Bank Nifty ended the weekly sensex expiry day on a positive note, up 0.4% at 57380.

Technical Outlook :

• The Index started the day with gap-up opening. However, profit booking from higher levels dragged index lower. As a result, the daily price action formed small bear candle with higher high higher low above the rising gap(57380-57221), indicating positive bias.

• Index managed to close above previous session high after two days breather as buying demand from key 50-day moving average help to regain upward momentum. Also the index continues to hold above 200-day EMA and index remains broadly defined range between 56700 and 58000. Holding key support of 56700 will keep pullback options open towards 58000 levels on the higher side.

• In the process, strong support is placed around 56700 being 200 days EMA .

• The PSU Bank Index formed doji like candle signaling buying from key moving average. Going ahead, follow through strength above last week high (8760) would open the door for next leg of up move towards 9100 levels

Intraday Rational :

• Trend - Prolongation of consolidation above 200 days EMA, indicating positive bias

• Levels : Buy around 80% retracemt of last 2- day ramge.

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