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Nifty

Day that was..

Indian equity benchmark extended its winning streak for third consecutive session. Nifty settled the day at 25,819 with a gain of 0.40%. Market breadth was in favour of advance with an A/D ratio of 1.2:1. Broader market has relatively outperformed the benchmark wherein Both Mid and Smallcap index gain 0.50% each. Sectorally, Barring IT, all other indices closed in green wherein Metals, PSUs bank and FMCG outperformed.

Technical Outlook:

* Index opened on a subdued note and witnessed initial decline; however, buying interest emerged near the 20-day EMA, reaffirming it as a strong short-term support. The daily price action has formed a bullish candle with a higher high–higher low structure, signaling strengthening upside momentum.

* Key point to highlight is, with current sharp upmove Bank nifty is just trading 200 points away from its all-time high, indicating strong buying demand from elevated levels. Since it carries 35% weightage in Nifty, we believe the current momentum will help index to extend its prevailing upmove and gradually advance toward to challenge its all-time high (26,370) in the coming weeks. Hence any decline from current level should be used a “buy-on-dips” strategy wherein focus should be on accumulating beneficiaries of trade deal of India with US & European Union, as strong support is placed around 25,200 being 200-day EMA.

* On the broader market front, Nifty midcap index has rebounded from 52 weeks EMA which has been held firm since past nine months while small cap index witnessed sharp pullback from lower band of six months falling channel. The improving market breadth would result into broadening of the ongoing rally.

* Market breadth has been witnessing improvement, as the percentage of stocks trading above their 50 days SMA has bounced from bearish extremes of 15% to 52% levels, while percentage of stocks above 200-day SMA within the Nifty 500 universe enhanced to 41%. Historically, such contractions in breadth have preceded durable market bottoms, with extreme bearish readings near 15%.

* Sectorally, Since CY-06, on four occasions IT index has witnessed a maximum price wise correction of 34% and time wise correction of 6- 7 quarters. Post such phases, the index has typically made new highs. With current week’s sharp decline, it has completed 30% correction. Thereby focus should be on accumulating quality IT stocks in a staggered manner as it approaches maturity of price and time wise maturity

Key Monitorable:

* US GDP data

* Brent Crude: Once again retreated from key hurdle of $70-72 range. Only a decisive close above $72 would fuel the momentum for next leg of up move3

Intraday Rational:

* Trend- Higher high pattern from three consecutive session

* Levels- Buy around 50% retracement of yesterday upmove(25660- 25844)

Nifty Bank

Day that was:

BankNifty extended its winning streak for third consecutive session to settled the day at 61,550 with a gain of 0.6%. Nifty PSU bank relatively outperformed gaining 1.3%.

Technical Outlook:

* Index opened on a flat note and witnessed supportive efforts emerging near previous session high and continued to form higher high-low structure for third-consecutive session. The daily price action has formed bull candle, carrying higher high-low structure, indicating buying demand from lower levels.

* Key point to highlight, index has witnessed follow through to its previous sessions bull candle and shy away 200 points from its life high signaling inherent strength. Going ahead we expect Index to gradually resolve higher and challenge its all-time high high of 61800 levels in coming weeks.

* On a broader perspective Index has staged a strong rebound from its previous resistance, now acting as support(57628) in line with the change-of-polarity principle, indicating resumption of uptrend. Any corrective declines from current levels should be viewed as buying opportunities as strong demand zone is identified near 59,700, being 50-day EMA and 61.8% retracement of the current up move (57,783-61,674).

* Meanwhile, the Nifty PSU Bank Index clocked a fresh All time high outperforming the benchmark, reinforcing near-term bullish momentum. Going forward, the index is expected to advance toward the 9,700 zone, being 161.8% external retracement of recent decline

* Intraday Rational:

* Trend- Higher high-low pattern for third consecutive session

* Levels - Buy around 50% retracement of yesterday upmove(61053-61568).

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