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Nifty : 23446

Technical Outlook

Day that was ..

Equity benchmark drifted lower as IRDAI’s new draft rules coupled with spike in US 10 year treasury yields and crude oil prices dented the market sentiment. Nifty settled at 23,063, down 383 points (1.65%). Sectorally, Pharma and IT offered mild resilience, while negative sentiment surrounding IRDAI's proposed distribution paper severely dragged insurance and financial stocks.

Technical Outlook :

• The index continued to inch southward post gap down opening as intraday pullbacks were short lived. Consequently, daily price action resulted into sizable bear candle that hauled Nifty to June low of 23070. Compounding the damage, a steep drop in Bank Nifty heavily weighed down the headline index due to its high sectoral weightage.

• Going ahead, holding psychological mark of 23,000 amid oversold conditions is essential to prevent deeper breakdowns toward the medium-term structural support placed at 22,600 as it is cluster of long term rising trend lines (as shown in chart) that coincides with the 80% retracement of the April-August rally (22182-24774).

• Daily momentum oscillators continue to show early signs of selling exhaustion. A prominent positive RSI divergence has surfaced on the daily chart, marked by the RSI printing distinctive higher lows while the price index registered lower lows. This technical divergence underscores an underlying bullish shift in momentum. Concurrently, with the weekly Stochastic oscillator deep within historical oversold terrain, a highly stretched downside layout suggest traders for refraining from creating aggressive short positions.

• The index continues to languish under a relentless corrective structure, marking a 7-week continuous fall in Nifty. It has consistently been unable to close above its previous week's high over the last 6 to 7 weeks. Therefore, to trigger a definitive pullback rally index need to witness following validations:

• A) The Nifty needs to secure a decisive daily close above the previous week’s high ~23500 a milestone hurdle it hasn't crossed during this 7- week correction.

• B) The pullback move accompanied by a faster pace of retracement on the lower degree charts, will confirm a trend reversal and accelerate a dynamic recovery rally toward major psychological targets.

Key Monitorable :

1. Geopolitical developments, Middle East tensions, and associated energy-supply risks.

2. Crude oil trajectory and global inflation expectations 3. US 10-year Treasury yield trajectory.

Intraday Rational :

• Trend – Highly volatile rangebound structure with a cautious positive bias above 23,300.

• Levels – Sell around 50%-61.8% retracement level, of Thursday decline

Nifty Bank : 55438

Technical Outlook

Day that was :

Bank Nifty ended the weekly Sensex expiry on negative note, at 55438 down 1.9% on back IRDA news developments .

Technical Outlook :

• The index opened with gap-down action and, remained southward and closed near the low point of the day. Consequently, the daily price action formed a bear candle with lower high lower low, indicating corrective bias.

• Index breached last two weeks low around 55700 and formed lower high lower low indicating weakness. Bias remains corrective as long as it closes below previous session high. On higher side 56,700 is resistance to watch out for being 200-day EMA.

• Immediate support is placed around 54200 levels a crucial support area. This zone aligns with the 80% retracement level of the June rally, spanning from 53,027 to 58,706.

• The PSU Bank Index formed bear candle with lower high lower low indicating extended consolidation. Going ahead, holding 8150 will lead to pullback towards 8600 levels being 61.8% retracement of current decline.

Intraday Rational :

• Trend - Prolongation of consolidation around 52 weeks EMA

• Levels: Sell around 50%-61.8% retracement level, of Thursday decline

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