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Nifty : 22687

Technical Outlook

Day that was ..

The Nifty 50 extended its decline for the third consecutive session on Thursday tracking escalating geopolitical uncertainty that pushed Brent crude oil prices above $110 mark. Nifty declined around 123 points, or 0.54%, to close at 22,687. Selling pressure intensified across the broader market, with both the Midcap and Smallcap indices declining over 1% each. The entire session was dominated by severe broad-based weakness, with sectors like FMCG which continued to underperform, and IT which saw profit booking whereas Pharma marginally outperformed.

Technical Outlook :

• The index formed a Doji-like candle after opening around 23,700 mark, reflecting indecision following the recent decline.

• Nifty has retested the two months falling channel breakout area and now finding supportive efforts from the immediate support of 22500 zone. The ability to attract buying interest around this zone will be crucial in determining whether the recent recovery remains intact. Further, a decisive close above previous session higher would confirm pasue in downward momentum.

• We expect volatility to remain elevated amidst escalating geopolitical tension and rise in crude oil prices 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. Meanwhile on the upside, last week’s high of 23,150 remains the immediate overhead resistance, above which next leg of up move would unfold.

• The Indian market had lagged its global counterparts due to AI-driven momentum. However, the recent sell-off in global AI-driven stocks, fuelled by concerns about Fed interest rate hikes and financing of AI investments, could serve as a supportive tailwind for the growth-oriented Indian market, potentially attracting FII’s in the near future.

• Additionally, in the near term, the market breadth is nearing its most bearish extreme, with around 13% 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.

• The daily Stochastic has cooled off from overbought territory now at 46, easing the elevated momentum conditions that had developed during the recent sharp recovery. This retracement could allow the index to consolidate before its next directional move, although renewed weakness in price action would delay the prospects of recovery.

Key Monitorables

• US Midterm Elections

• Developments in geopolitical affairs

• Brent Crude prices and US 10-Year Treasury yields

Intraday Rational :

Trend – Doji like candle indicating indecision

Levels – Sell around 61.8% retracement of 2 days range

Nifty Bank : 54926

Technical Outlook

Day that was :

Bank Nifty ended the day on flat note at 54926, on back of mixed global cues. However, the Nifty PSU Bank also ended marginally positive 0.1% for the day.

Technical Outlook :

• The index started the day with gap-down, then found supportive efforts from 54400 levels thereafter rebounded higher and then traded in a range (54460-55130). The daily price action formed a high wave like candle with shadows on either side, indicating extended breather.

• Index bias remains corrective as long as it forms lower high lower low formation. Index needs to decisively close above previous session high(55134) to pause the ongoing corrective phase. 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 keep pullback option open. Wherein a decisive close above 50 days EMA placed at 56000 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 - High wave candle , indicating breather

• Levels: Sell around 80% retracement of 2 days range

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