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Nifty :22508

Technical Outlook

Week that was…

Indian equity benchmarks closed on a positive note tracking pullback in global equities and settled at 22,508, up by 111 points. The market breadth was in favor of declines, with an A/D ratio of 1:1.60. Sector-wise, Pharma, Healthcare and Financial Services outperformed, while, Realty, PSU Bank and FMCG were the laggards.

Technical Outlook

• The Nifty opened below Thursday’s sessions low and covered the entire candle’s range and traded within a narrow range of 88 points throughout the day. As a result, the daily price action formed a bull candle, indicating strength at lower levels.

• Boosted by strong global cues, Nifty is poised for a robust start to the day. A key point to highlight is that, past five sessions slower pace of retracement has helped index to form a higher base despite ongoing global volatility, highlighting inherent strength. Thus, a decisive close above the upper band of consolidation placed at 22650 (coincided with 20-day EMA) would pave the way to head towards the psychological mark of 23000 that coincides with six months falling trendline. In the process, volatility is likely to persist, influenced by tariff-related developments and the upcoming FOMC meeting in the week. Meanwhile, 21800 will continue to serve as a key support level. Hence, focus should be on accumulating quality stocks in a staggered manner form medium term perspective. Our view of a technical pullback is backed by the following observations:

• a. The ratio chart of Nifty/Dow Jones has recorded a breakout from a six-month falling channel, indicating the domestic market could relatively outperform US equities going forward.

• b. Over the past three decades, the average drawdown below the 52-week EMA as been 6-7%, followed by >20% returns over the next 12 months. The Nifty is currently ~6% below its 52-week EMA, supporting a potential recovery.

• c. The cool off in US 10-year Yields, Dollar Index and Brent crude augurs well for emerging markets by easing inflation and boosting sentiment.

• e. The monthly stochastic oscillator is in the extreme oversold territory at 13 (lowest since 2002), indicating an impending pullback.

• On the broader market front, the Midcap and Small cap indices, witnessed supportive efforts in the vicinity of 61.80% retracement while protecting previous week’s low, indicating strength. Both the indices witnessed buying demand from the decade-long trendline (Adj Jan 08 high and Oct 21 high) coupled with a positive divergence of the RSI, suggesting that the midcap index could witness extended pullback toward 51500, while the small-cap index may reach 16000 levels. Hence, the focus should be on accumulating quality stocks (backed by strong earnings) in a staggered manner.

• The index has corrected >16% over the past five months, hauling it to a long-term rising trendline amid oversold conditions. We believe ongoing consolidation would help the index form a stage for the next leg of a pullback while absorbing tariff-related anxiety. The formation of a lower high-low signifies corrective bias, wherein strong support is placed around the 21800.

• a) A rising trendline drawn adjoining subsequent major lows off Jun-22 (15183) is placed at 21800. b) Support at 61.80% retracement (18837-26277) is in the vicinity of 21800. c) The 24-month EMA support is also positioned in the vicinity

Nifty Bank : 48354

Technical Outlook

Day that was :

The Bank Nifty settled the day on a positive note at 48354 , up by 0 .61 % . The Nifty PSU Banking index underperformed the benchmark and settled at 5770 , down by 0 .24 % .

Technical Outlook :

• The Bank Nifty opened the week with a gap up and observed range bound action, where it traded in a tight range of 193 points throughout the day . The price action created a small bull candle with upper wick and making higher high -low from last four sessions indicating strength in the pullback .

• Going ahead, a decisive close above its previous weeks high (which is not the case since past 5 weeks) will be the initial sign of resumption in up move while the sustainability above the same will keep the pullback option open towards the upper end of the broader consolidation range (49600), coinciding with 52 -week EMA . Meanwhile, near -term support on the downside is placed at 46800 which is 61 . 8 % retracement of Oct -23 to Sept -24 rally (42105 -54467 ) . The daily RSI bounced from the multi -support mark of 35 from where it has experienced a pullback on multiple occasions, since over past two months and witnessed a bullish crossover in Monday’s sessions indicating positive bias .

• Key point to highlight is that, despite high volatility observed in last week amid US tariff concerns and the India as well as US Inflation data, the index managed to hold above the lower end of the broader consolidation range of (47800 ) for the fourth time in last two month on a closing basis, indicating resilience as domestic market is faring well compared to the global peers .

• Structurally, with 12 % correction already in place the index is witnessing a base formation near the lower band of 2 years rising channel, which is also in the vicinity of 100 -week EMA .

• In tandem with the benchmark index, the Nifty PVT Bank index is witnessing a slower pace of retracement as over past five weeks it has retraced only 80 % of preceding two weeks up move (23508 -25025), indicating relative strength . Going ahead, a close above the previous weeks high of 24329 will be the initial sign of the resumption in upward momentum, Meanwhile, immediate support is placed at 23500 which is in the vicinity of previous swing low

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