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Nifty :22547

Technical Outlook

Day that was…

Indian equity benchmarks extended losses over sixth consecutive session tracking muted global cues and settled on a flat note at 22547, down by 6 points. The market breadth remained in favor of declines with the A/D ratio of 1:1.5. The broader market underperformed where both the Nifty midcap index and the Nifty small cap index closed negative, down by around 0.50% respectively. Sectorally, Consumer Durable, Auto and FMCG outperformed while Metal, Realty and PSU Bank were the laggard.

Technical Outlook:

* Nifty opened flat, influenced by muted global cues, and remained within a narrow 100-point range throughout the session. This led to the formation of a Doji candle with an upper wick, indicating continuation of corrective bias post breakdown from contracting range in last session.

* In the upcoming session elevated volatility cannot be ruled out tracking monthly expiry. Meanwhile, the formation of lower high-low clearly indicates prolongation of corrective bias wherein strong support is place at 22200 being 80% retracement of (21137-26277) which remains important level to watch out for in upcoming sessions. Meanwhile, to pause the ongoing corrective phase, a decisive close above the previous day’s high would be required. Further, for a meaningful pullback to materialize index need to decisively close above 23000 mark.

* On the broader market front is that, past two decades data suggest, in a bull market phase, Nifty midcap and small cap have a seen average correction of 27% and 29%, respectively. In current scenario, we believe both indices are approaching extremes of their bull market correction as Nifty midcap and small cap have already corrected 20% and 24%, respectively, indicating limited downside going ahead. Hence, focus should be on accumulating quality stocks (backed by strong earnings) in a staggered manner.

* In the current corrective phase, where there is lot of pessimism in the market, we are witnessing some silver linings which would provide impetus for pullback rally in coming weeks, details listed below:

* a) Breadth Indicator: The market breadth has approached the bearish extreme as % of stocks (within Nifty 500 universe) above 50 and 200 days SMA has approached their bearish extreme of 13 and 5 respectively during last week. Historically, such bearish readings have paved the way for durable bottom in subsequent weeks.

* b) Momentum indicator: Past two decades data suggest that, the weekly RSI below 30 suggest oversold condition for the Nifty midcap and small cap indices. Which have been tested only on six occasions, resulting into 20% up move in subsequent three months, wherein drawdowns have been limited to 5%. With recent reading of 33 we believe; the risk reward remain favorable as pullback from bearish extremes cannot be ruled out.

* c) The US Dollar index has been sustaining below 107 marks for the second consecutive week. Further weakness would be beneficial for emerging markets.

* d) Brent crude is sustaining below $75, which augurs well for the Indian economy and equity markets.

* e) Further development on ease off in geopolitical worries would bring some stability in equity markets.

Nifty Bank : 48608

Technical Outlook

Day that was…

The Bank Nifty closed the Tuesday’s trading session on a flat note, amid volatility, down by 43 points . Meanwhile, Nifty PSU Bank index underperformed the benchmark index and closed the day on a negative note at 5880 , down by 1 .22 % .

Technical Outlook

* The Bank Nifty opened the session on a subdued note and traded within a tight range of 330 points throughout the day . The price action resulted in a small bear candle, indicating prolonged consolidation .

* Key point to highlight is that, the index is consolidating in a broader range 49600 -48700 and a lack of follow through strength on either side signifies prolonged consolidation . Thus, indicating that a breakout on either side of the range would dictate the further course of action, till then the consolidation will continue, amid elevated volatility on the back of monthly expiry .

* Structurally, the Bank Nifty is showing resilience as it did not breach the previous swing low contrary to the Nifty index and witnessed a higher low pattern formation in the vicinity of the lower band of 2 years rising channel, indicating relative strength . Thus, making us believe, that the index would eventually resolve higher and move beyond immediate hurdle of 49600 being previous week high coinciding with 52 -week EMA . In the process, the strong support is placed around the swing low of 47800 , which is also in the vicinity of 100 -week EMA .

* Mirroring the benchmark index, the Nifty Private Bank index witnessed a subdued session and observed a rangebound action throughout the day . Structurally, the PVT Bank index witnessed buying demand from the vicinity of the 50 % retracement mark of its previous up -move (23508 -25025 ) on multiple occasions, contrary to the Bank Nifty index, indicating relative outperformance . Going ahead, we believe that the index will continue to resolve higher towards 25000 being previous swing high . Meanwhile, immediate support is placed at 23500 , being the recent swing low .

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