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Nifty :23560

Technical Outlook

Week that was…

Equity benchmark extended gains over second consecutive week tracking firm global cues amid temporary pause on Tariff by Trump Government and RBI policy outcome. Nifty gained 0.3% to settle at 23560. %. The market breadth remained negative with A/D ratio of 1:1.70 as broader market relatively underperformed, especially smallcap100 index which is down by ~0.29%. Sectorally, Pharma, Metal and IT outshone. While, FMCG, Realty, and Oil & Gas took breather for the week.

Technical Outlook:

* effort near the vicinity of 50% retracement of the previous up move (22786-23632) and gradually moved north and took a breather after the sharp up move. As a result, the weekly price action, resulted into a bull candle carrying higher high-low, indicating continuation of positive bias.

* Going ahead, the index is taking breather after witnessing breakout from three week’s base formation. We believe, ongoing breather would make market healthy and gradually pave the way to head towards 24000 in coming weeks. In the process, bouts of volatility cannot be ruled out amid inflation print on domestic as well as US front, while the state election outcome indicating sentimental positivity. Meanwhile, Prime Minister Modi's visit to US would be key monitorable. Hence, accumulating quality stocks on dip would be the prudent strategy to adopt as immediate support is placed at 23200.

* Key point to highlight is that, mirroring the benchmark move, supportive efforts emerged in Bank Nifty from lower band of two years rising channel and ratio chart of Bank Nifty / Nifty is bouncing from long term cycle lows, indicating relative outperformance going ahead.

* Historically we have observed that, within a structural bull market, secondary correction is a common phenomenon. With current 13% correction in place, the index has approached price and time wise correction. Structurally, since 2002, bull market average corrections have been to the tune of 14% while time wise index has not recorded negative monthly close for more than 3-4 months. Over past four months index has corrected 13% while absorbing the pessimism around the global as well as domestic uncertainties, leading to bearish extreme reading on the sentiment as well as momentum indicators, suggesting impending pullback.

* Meanwhile, the formation of higher high after six weeks corrective phase and close above budget sessions high, indicating shift in momentum that makes us revise support base at 23200 as it is confluence of 61.80% retracement of recent up move (22786-23762) coincided with current week’s low of 23222.

* On the global macro front, Amidst Tariff related anxiety, US Dollar index made a failed attempt to surpass 110 mark and currently trading below 108 levels. Meanwhile, Brent crude extended losses over third week in a row and hovering around 75 marks. Falling US dollar index and Brent crude augurs well for risk on sentiment in emerging markets. On the sectoral front, BFSI, Auto, Consumption, Hospitality would be in focus.

* On the broader market front, Nifty Midcap and Small Cap are poised at long term four years rising trend line. The sustainability above last week’s hammer like candle would lead to revival in upward momentum in the broader market. Meanwhile, the % of stocks above 50 days EMA have seen decent improvement as it has bounced to 25 levels compared to January reading of 10. Meanwhile, monthly stochastic oscillator is poised at lowest levels since 2008, at 20, indicating impending pullback.

Nifty Bank : 50158

Technical Outlook

Week that was :

The Bank Nifty witnessed positive close for the second consecutive week where it closed the week on a positive note at 50158 , up by 1 .32 % . The Nifty PVT Banking index outperformed the benchmark move and closed the week at 24924 , up by 2 .04 % .

Technical Outlook :

* The Bank Nifty started the week with a gap -down opening, however it witnessed buying demand from the vicinity of budget day’s low which helped index to recover intra week losses and gradually moved north making higher high in each session throughout the week . In the process, the index created a bull candle closing above the previous week’s high, indicating bullish bias .

* Going ahead, sustenance above 52 -week EMA and previous week’s high will open the door for 51600 in coming weeks . The key support is placed at 48900 being 61 . 8 % retracement of recent up -move (47844 -50641 ) and weekly low, The Inflation on domestic and US front will be the key data points to monitor .

* The Bank Nifty has witnessed a breakout from the three -week base formation around the lower band of 2 years rising channel and closed above the budget day high, indicating revival in the upward momentum . Thus, making us believe, that the index will continue to resolve higher and move towards the mark of 51600 being 61 . 8 % retracement of previous fall (53888 -47844 ) . In the process, the mark of 48900 shall provide immediate support and any dip witnessed hereon should be capitalized as a buying opportunity in quality stock in a staggered manner .

* Structurally, after 12 % correction the Bank Nifty bounced from the lower end of the long -term rising trendline amid oversold condition, indicating a pause in the downward momentum . The change in market breadth observed in the current week suggests that a short -term bottom is in place and the mark of 48900 will act as a support .

* The PVT Bank index witnessed positive close above previous week’s high reclaiming 52 -week EMA after four weeks, Thus, outperforming the benchmark and closing positive for the second consecutive week, indicating a healthy sign of continuation to the ongoing bullish momentum . Moving ahead, the next level of resistance is placed at 25250 which is the upper end of the falling channel formed adjoining the moves of Sep -24 & Dec -24 .

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