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Nifty : 22811

Technical Outlook

Day that was ..

The Nifty 50 extended its decline on Wednesday, falling approximately 77 points, or 0.34%, to close at 22,811. Selling pressure intensified across the broader market, with the Midcap index declining approximately 1.6% and the Smallcap index falling around 2.4%. IT stocks outperformed, while cement stocks edged marginally higher. Financials and chemicals were the major laggards, followed by metals and FMCG, reflecting broad-based weakness amid elevated crude oil prices and persistent geopolitical uncertainty.

Technical Outlook :

• Nifty failed to capitalise initial up move despite gap up opening and gradually drifted downward throughout the day. Consequently, Nifty pared 470 points from days high, before settling at 22811. The, daily price action resulted into sizable bearish candle forming lower high-low, indicating extended breather.

• Following the extended breather over the second consecutive session, the index has retraced back to its two-month falling channel breakout area before settling above the 10-day EMA. During this process, the daily Stochastic Oscillator has cooled off from overbought conditions, which would eventually set the stage for next leg of up move. To reinforce this positive trajectory, sustained strength above last week's high at 23,150 will be essential, enabling the market to extend the rally toward the target level of 23,500 in the upcoming weeks. Conversely, failure to sustain above 23,150, could lead to a prolonged consolidation within the range of 23,150 to 22,500 zone.

• On the broader market front, along with Nifty Midcap now Nifty small cap index has closed below its 200-day EMA, reflecting broader market weakness. The ability to reclaim these crucial moving averages will be vital to restoring upward momentum and preventing the recent pullback from developing into a deeper correction.

• Additionally, in the near term, the market breadth is nearing its most bearish extreme, with less than 15% of stocks trading above their 50-day SMA. This extremely bearish reading augurs well for a technical pullback in the following weeks. Hence, for a durable rally to take place, broader market participation will be essential. Midcap and small cap index closing decisively above the previous week’s high would be the first indication of broadening of rally

• Going ahead, volatility is expected to remain elevated ahead of US Midterm elections. In the process, a key level of support for the Nifty is placed at its recent panic low of 22,200, coinciding with the 200-week EMA at 22,400. Therefore, maintaining a stock-centric approach and focusing on companies with strong earnings remains crucial. Only a breach below 22200 would lead to extended correction

Key Monitorables

• US Midterm Elections

• Developments in geopolitical affairs

• Brent Crude prices and US 10-Year Treasury yields

Intraday Rational :

Trend – Close around 20-day EMA, signifies revival in uptrend

Levels – Sell around 50% retracement of Wednesdays range.

Nifty Bank : 54976

Technical Outlook

Day that was :

Bank Nifty ended the day down 0.9% at 54976, on back of mixed global cues. However, the Nifty PSU Bank relatively less down losing 0.5% for the day.

Technical Outlook :

• The index started the day with strong positive opening but couldn’t sustain above previous session high and remained southward as intraday pullbacks were short lived. The daily price action formed is Bear candle with lower high lower low, indicating extended breather.

• For second consecutive day Index failed to sustain at higher levels and faced resistance around 55900 indicating selling after positive opening. Current breather is seen as a healthy retracement as Index has retraced only 61.8% of current 6 days up move (54383-56065).

• Going ahead, holding above last week’s low of 54700 levels coinciding with 61.8% retracement of current up move (on a closing basis) would result into prolongation of consolidation and consolidate in the range 54,700-56000. Only a decisive close above 50 days EMA placed at 56020 would open door for extension of move towards 56,500 levels, coinciding with the 61.8% Fibonacci retracement of the recent decline and the 200-day EMA.

• NiftyPSU Bank Index has witnessed breakout above last 3 weeks high (8272) indicating acceleration of upward momentum. We expect Index to head towards 8500 levels being 61.8% retracement of recent decline (8856-7862).

Intraday Rational :

• Trend - Close above 20-day EMA, indicating conclusion of corrective bias

• Levels: Sell around 50% retracement of Wednesdays range.

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