The Bank Nifty opened gap -down and witnessed intraday bounce in the first half of the session - ICICI Direct
Nifty : 22829
Technical Outlook
Day that was… Equity benchmarks drifted downward as the selling pressure in index heavy weights weighed down the market sentiment. The Nifty plunged 263 points or 1.14% to settle the session at 22829. Market breadth remained in favor of declines with A/D ratio 1:7 as broader market relatively underperformed since Nifty Midcap, small cap indices lost ~3%, each. Sectorally, all indices ended in red dragged by IT, Metal, Pharma
Technical Outlook:
• The index started the week on a negative note and closed below 23000 for the first time after 7 months. After the initial gap down (23092-22940) index tried to fill the gap, but failed to do so as intraday pullbacks were sold into. Consequently, daily price action resulted into a bear candle carrying lower highlow, indicating continuation of corrective bias. Meanwhile, India Vix closed above 18 levels after 5 months, indicating rise in volatility.
• Key point to highlight is that, with recent correction Nifty has approached the lower band of the trend line (drawn adjoining Aug-Nov 24 lows) amid oversold territory (as current reading on monthly stochastic is the lowest since 2002) and the positive divergence on daily RSI suggest that possibility of technical bounce can not be ruled out in the near term. However, for a meaningful pullback to materialise index need to decisively close and sustain above previous session high of 23050 for next couple of sessions. Further, 23400 would continue to act as key resistance surpassing which would open the door for pre-budget rally. In the process, 22500 would continue to act as key support
• On the global macro front key monitorable is that, the US 10-year bond yields along with US Dollar index are cooling off as the anxiety around the Trump 2.0 policies are settling down. We believe, abating upward momentum in US bond yield as well as Dollar index would provide cushion to domestic market that would fuel the momentum for pullback rally in coming weeks.
• In the process, bouts of volatility cannot be ruled out owing to US Fed meet outcome, monthly expiry week, Union Budget coupled with Q3FY25 earnings of many heavy weight companies which would have bearing on the market.
• Historically, since 2002, Nifty has not recorded negative close for more than 3 consecutive months wherein average correction has been to the tune of 14% (barring 2008 & 2020 scenario). Buying in such scenario has been fruitful as Nifty has garnered 15% returns in subsequent three months. In current scenario, with 13% correction already in place, we expect index to maintain the same rhythm as downside remains limited with key support at 22500 levels
• On the downside, critical support is placed at 22,500 which aligns with the implied target of the recent consolidation breakdown (24,200–23,300) and coincides with the 50% retracement of the October 2023 to September 2024 rally (18,838–26,277).
• On the broader market front, we witnessed follow up selling of Friday’s decline in the Nifty Midcap and Small Cap indices, both indices closed below the previous two weeks low and 52-week EMA indicating extended correction going ahea
Nifty Bank : 48064
Technical Outlook
Day that was
The Bank Nifty continued the corrective bias from the previous week and ended Monday’s session on a negative note at 48064 , down by 0 .63 % . Meanwhile, Nifty PSU Bank index underperformed the benchmark by closing on a negative note at 6093 , down by 0 .97 % . Market breadth remained in favor of declines with A/D ratio 1 : 4
Technical Outlook
• The Bank Nifty opened gap -down and witnessed intraday bounce in the first half of the session . However, the pullback was short -lived and the index resumed its correction leading to a negative close . As a result, daily price action resulted into bear candle that engulfed last session’s bull candle, indicating corrective bias
• Going ahead, for the ongoing correction to pause, the index must decisively close above the previous day’s high . Further, the mark of 49650 which is upper end of the consolidation range (49850 -49650 ) as well as 52 -week EMA will be the immediate hurdle to watch out for, above which a meaningful pullback will materialize . On the other hand, the near -term support is placed at 46800 which is 61 . 8 % retracement of Oct -23 to Sept -24 rally (42105 -54467 ) .
• The key point to highlight is that, tracking past four months 12 % correction the weekly stochastic indicator has entered into extreme oversold territory, currently below 8 (the first time since 2013 ) . Historically, such conditions have led to a meaningful pullback in next one month .
• Mirroring the benchmark index, the Nifty PSU Bank index witnessed intraday bounce . However, the bounce was short - lived and the index closed on a negative note for the fifth consecutive day . Moving ahead, for any meaningful pullback to materialize the index needs to close above the previous sessions high and sustain above the same for couple of trading sessions . Meanwhile, the recent swing low of 5866 , will be crucial support level on the downside
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