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Nifty :23658

Technical Outlook

Day that was…

Indian equity benchmarks witnessed a gap-up opening and continued the bullish bias from previous week where it settled at 23,658, up 1.32%. The Nifty Midcap and Small cap indices gained 1.30% and 1.10%, respectively, reflecting strong participation across segments. Sectorally, all indices ended in green, with Banking, Realty, and IT emerging as the top performers

Technical Outlook

* The Nifty opened the week on a positive note and surged higher throughout the day where it reclaimed its 200-day EMA, maintaining its higher high low structure from previous sessions. The price action resulted in a strong bull candle, indicating continuation of upward momentum.

* Key point to highlight is that, Nifty witnessed follow through strength after breaking out of a six-month falling trendline on the weekly chart, where it reclaimed its 200-day EMA. The structural up-move seems to be intact where the next level of defence is placed at 23800 being the previous swing high. Meanwhile, Bank Nifty recouped past five weeks decline in just a single week and continued the bullish momentum in Monday’s trading session where it closed above its previous 2 months high, indicating the bullish strength. The faster pace of retracement signifies structural turnaround that would provide impetus for next leg of up move as Bank Nifty carries 36% weightage in Nifty. Going ahead, given the sharp ~1,350-point rally in Nifty (over past six sessions), some volatility is expected; however, any pullback should be viewed as a buying opportunity rather than a negative reversal. The previous five-month “sell-on-rally” approach has now shifted to a “buy-on-dips” strategy as sentiment has improved. As long as 22,600 remains intact, the focus should be on accumulating quality stocks with a medium-term perspective.

* Structurally, after a steep 16% correction over the last five months, market sentiment and momentum indicators have rebounded from bearish extremes. The percentage of stocks trading above their 50-day SMA surged from 7% to 60% in Friday’s session, highlighting the strength of the recovery. Historically, corrections below the 52-week EMA have averaged 6-7%. In the current scenario, the Nifty followed a similar pattern, staging a recovery after a 6% drawdown and reclaiming the 52-week EMA on Friday. Data from the past three decades suggests that buying near the 52-week EMA offers a favorable risk-reward ratio, with a median return of 23% over the next 12 months. Given this historical precedent, we believe the index is approaching price-wise maturity with limited downside and is poised for the next leg of the uptrend. Our constructive bias is validated by following observations:

* a. The ratio chart of Nifty/Dow Jones has recorded a breakout from a six-month falling channel, indicating the domestic market could relatively outperform US equities going forward.

* b. The cool off in US 10-year Yields, Dollar Index and Brent crude augurs well for emerging markets by easing inflation and boosting sentiment.

* On the broader market front, the Midcap and Small cap indices closed above their 100- week EMA, breaking out from a three-month falling trendline, an encouraging sign of inherent strength. Both the indices have seen a rebound after approaching maturity of price and time wise correction. Historically, maximum average correction in Midcap and small cap index has been to the tune of 27% and 29% while time wise such correction lasted 5 months. Subsequently, both indices have seen 28% returns in next six months. Hence, the focus should be on accumulating quality stocks (backed by strong earnings) in a staggered manner.

* The critical support for the Nifty stands at 22,600, which represents a 50% retracement of the current upmove (21,965–23,216). This level is expected to act as a strong cushion, ensuring that dips remain buying opportunities rather than trend reversals.

Nifty Bank : 51705

Technical Outlook

Day that was :

The Bank Nifty witnessed a gap -up opening, enduring the bullish momentum from the previous week where it settled the Monday’s trading session at 51705 , up by 2 .20 % . Meanwhile, both the Nifty PVT Bank as well as the Nifty PSU bank index contributed to this bullish momentum, rising 2 .42 % and 3 .18 % respectively .

Technical Outlook :

* The Bank Nifty opened the week on a positive note and continued the bullish momentum throughout the day, where it reclaimed and closed above its 200 -day EMA . The price action resulted in a strong bull candle, indicating continuation of the ongoing upward momentum .

* Key point to highlight is that, the index continued the bullish momentum in Monday’s trading session where it closed above its previous 2 months high, indicating structural turn around . The faster pace of retracement observed from the multi -support zone of 47800 assisted the index to regain its past five weeks decline in just a single week . Moving ahead, the bullish momentum is likely to continue with added upside potential towards 52500 being 80 % retracement mark of the previous fall (53888 -47703 ) . Going ahead, given the sharp ~4000 -point rally in Bank Nifty (over past eight sessions), some volatility is expected ; however, any pullback should be viewed as a buying opportunity rather than a negative reversal . Meanwhile the near -term support is placed at 50200 which is 38 . 2 % Fibonacci retracement mark of the recent up -move (47703 -51801 ) .

* Structurally, the Bank Nifty bounced from the vicinity of 100 -week EMA after forming a triple bottom pattern . Additionally, the faster pace of retracement resulted in the momentum indicators to rebound from bearish extremes . The weekly stochastic oscillator has observed a bullish crossover suggesting acceleration to the ongoing up -move .

* Mirroring the benchmark index, the Nifty PSU Bank index witnessed a gap -up opening andcontinued the bullish momentum from the previous week . The price action created a strong bull candle, indicating structural up -move . Additionally, the daily MACD crossed 0 line on the upside, signaling potential shift towards bullish momentum . Going ahead, we expect the index continue the upward push and move towards 6600 being 61 . 8 % retracement of the previous fall (7248 -5530 ) .

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