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Nifty :22828

Technical Outlook

Week that was…

Indian equity benchmarks staged a strong rebound tracking Trump’s announcement of 90 days pause on Tariff and settled the week on a flat note at 22828. Market breadth was in favor of advances, with A/D ratio of 5:1, as the broader market outperformed. Sectorally, FMCG outshone while Realty and Metal underperformed.

Technical Outlook:

* The Nifty opened the week with a big gap-down (22904-21758) and witnessed a robust recovery. Consequently, Nifty recouped 5% from week's low. As a result, the weekly price action formed a sizeable bull candle, indicating powerful reversal.

* Nifty expected on witness gap-up opening amid positive global cues. Amidst recent elevated global volatility, Nifty` has managed to defend the key support of 21900 which has been held on multiple occasions (on a closing basis) over past one year. The current strong recovery supported by positive divergence on the weekly chart, indicates that bottom is in place. With current structural improvement we believe index has undergone a base formation while absorbing most of negative news and set the stage for next leg of up move towards 24000 in coming weeks. Hence, focus should be on accumulating quality stocks to build a medium-term portfolio onset of Q4 earning season.

* Since 2002, within a structural bull market, price wise maximum intermediate corrections have typically been to the tune of 18% (barring 2004 & 2006). Meanwhile, time wise such corrections last for average 8-9 months. In current scenario, we believe index is approaching price and time wise correction as index has already corrected 17% over past seven months. Historically, buying in such scenario has been rewarding, delivering an average return of 23% over the subsequent twelve months.

* Our positive bias is further validated by following observations:

* a) While sailing through the global volatility, Banking index managed to hold March lows and now forming a higher base, highlighting relative outperformance that bodes well for next leg of up move towards 53200

* b) The market breadth has been witnessing positive divergence as Nifty 500 has formed a lower low while % of stocks above 200 days SMA has formed a higher low as currently 15% stocks (Nifty 500 Universe) are above 200 days SMA compared to last month reading of 7%.

* c) The US Dollar index is on the verge of breakdown from two years low of 99.50.

* d) Brent crude oil is hovering around 63 after bouncing from 58 levels.

* e) S&P 500 VIX witnessed sharp decline after recording high of 60, indicating anxiety around tariff uncertainty would settle down soon.

* Mirroring the benchmark move, Nifty midcap and small cap indices have staged a strong rebound after retesting multi-year resistance trend line. Historically, maximum average correction in Midcap and small cap indices have been to the tune of 27% and 29% while time wise such correction lasted for 5 months. Subsequently, both indices have seen 28% returns in next six months.

* We expect volatility to prevail amid ongoing global uncertainty that makes us retain support base at 21900 as it is Mar-25 low of 21965.

Nifty Bank : 51002

Technical Outlook

Day that was :

The Bank Nifty index witnessed a volatile week amid RBI Monetary policy, where it settled the week on a negative note at 51002 , down by 0 .97 % . Meanwhile, the Nifty PSU Bank index underperformed the benchmark and settled at 6171 , down by 1 .53 % .

Technical Outlook :

* The Bank Nifty started the truncated week with a gap -down opening . However, it witnessed buying demand from 61 . 8 % retracement of the previous up -move (47702 -50796 ) which led to a recovery of ~1850 points . The price action resulted in a sizeable bull candle, indicating supportive efforts from the lower level .

* Key point to highlight is that, despite global volatility amid tariff related development the Bank Nifty managed to hold the March low and resumed its up -move after witnessing supportive efforts from 61 . 8 % retracement of the previous rally, indicating structural strength . Going ahead, we believe that the index is forming higher base and will eventually approach the recent swing high of 52000 in coming sessions, sustenance above which will lead to further upside towards 53200 being 80 % retracement of the previous fall (54467 -47702), thus indicating resumption of uptrend . Meanwhile, the recent swing low of 49200 will provide immediate support on the downside . However , bouts of volatility will prevail amid tariff development coupled with upcoming result season .

* The Bank Nifty started the truncated week with a gap -down opening . However, it witnessed buying demand from 61 . 8 % retracement of the previous up -move (47702 -50796 ) which led to a recovery of ~1850 points . The price action resulted in a sizeable bull candle, indicating supportive efforts from the lower level .

* Key point to highlight is that, despite global volatility amid tariff related development the Bank Nifty managed to hold the March low and resumed its up -move after witnessing supportive efforts from 61 . 8 % retracement of the previous rally, indicating structural strength . Going ahead, we believe that the index is forming higher base and will eventually approach the recent swing high of 52000 in coming sessions, sustenance above which will lead to further upside towards 53200 being 80 % retracement of the previous fall (54467 -47702), thus indicating resumption of uptrend . Meanwhile, the recent swing low of 49200 will provide immediate support on the downside . However , bouts of volatility will prevail amid tariff development coupled with upcoming result season .

* Structurally, the Bank Nifty is showing resilience, as it retraced only 61 . 8 % of the previous up -move as compared to the benchmark index which on the other hand retested the previous swing low . Additionally, the Bank Nifty is witnessing base formation near the lower band of 2 years rising channel, indicating relative outperformance .

* Mirroring the benchmark index, the Nifty PVT Bank index started the week with a gap -down opening, however buying demand from the vicinity of 61 . 8 % retracement of previous up -move (23783 -26042 ) lead to a recovery of ~1000 points, indicating supportive efforts from lower levels . Going ahead, we believe the index is forming higher base and will eventually resolve higher towards 25800 , indicating end of ongoing corrective bias . Meanwhile , the recent swing low of 24400 will act as an immediate support on the downside

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