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Nifty :22945

Technical Outlook

Day that was…

Equity benchmark experienced a volatile session where it settled the day on a flat note at 22945 , down by 0.06%. However, the market breadth remained in favor of declines with the A/D ratio of 1:3, as the broader market closed on a negative note. The Nifty midcap index closed on a flat note while the Nifty small cap index underperformed, closing down by 1.59%. Sectorally, IT, Oil & Gas, Metal gained for the day while Consumer Durables, FMCG and Auto were the laggard.

Technical Outlook

* The daily price action resulted into hammer like candle supported by higher low formation, after retesting the multi-support mark of 22800, thus indicating strong buying demand from lower band of the broader consolidation range (22800-23800).

* Structurally, the index managed to hold 22800 on multiple occasions in last one months where on Monday it witnessed a positive divergence on daily RSI, indicating a pause in downward momentum if the mark of 22800 is held on a closing basis. Going ahead, follow through strength and close above past two days identical high being around the psychological mark of 23000 will lead to northward momentum towards 23500, however; the strong support on the downside is placed at 22500.

* In the current corrective phase, the market breadth which gauge the sentimental indicator is indicating extreme pessimism as the, % of stocks above 50 SMA and 200 SMA within Nifty 500 Universe have entered the bearish extreme zone of 13. Historically, such an extreme reading led to abating downward momentum in subsequent weeks, eventually paving the way for a durable bottom. Hence, focus should be on accumulating quality stocks on dips backed by strong earnings.

* On the broader market front, the Nifty midcap index held the previous days low (48503) and witnessed a bounce from the vicinity of 80% retracement mark of election days low to Sep-24 rally (47246-60926) resulting in a hammer like candle, indicating buying demand from the lower level. The past two decades data suggest, in a bull market phase, Nifty midcap and small cap have seen maximum correction of 21% and 30%, respectively. In current scenario, with 20% and 23% correction already in place in Midcap and small cap, possibility of another 3%-5% correction cannot be ruled out.

* In the current corrective phase, where there is lot of pessimism in the market, we are witnessing some silver linings which would provide impetus for pullback rally in coming weeks, details listed below:

* A) The US Dollar index has cooled off and now on the verge of breakdown from recent consolidation 110-107. Sustenance below 106.5, would provide cushion to equities

* B) Ease-off in geopolitical worries would bring some stability in equity markets

* C) The developed markets like DJIA, DAX are trading just a percent away from their lifetime highs. Buoyancy in global equity markets bodes well for pullback in domestic market.

Nifty Bank : 49087

Technical Outlook

Week that was :

The Bank Nifty witnessed rangebound action, amid volatility where it settled the day on a subdued note at 48589 , down by 0 .35 % . Meanwhile, Nifty PVT Bank index mirrored the benchmarks move by closing marginally on a negative note at 24500 , down by 0 .20 % .

Technical Outlook :

* The Bank Nifty opened on a flat note and remained confined within a 500 -point range . The index held the previous days low, and witnessed supportive efforts from the vicinity of 61 . 8 % retracement mark of the previous up -move (47844 -50641), thus creating a hammer like candle, indicating buying demand from lower levels .

* Going ahead, a follow through buying and a close above 49300 being the identical high of last two sessions would be the initial sign of a pause in the ongoing corrective phase, whereas surpassing the mark of 50640 being the recent swing high will indicate the resumption of upward momentum . On the other hand, the key support is placed at 47844 being the previous swing low, coinciding with 80 % retracement of election low to Sept -24 rally, (46077 - 54467 ) .

* The key point to highlight, is that the Bank Nifty has witnessed a higher low pattern formation around the lower band of 2 years rising channel 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 recent swing low of 48525 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 channel amid oversold condition, indicating a pause in the downward momentum . Additionally, the Bank Nifty index did not breach the previous swing low contrary to the Nifty, thus, showing relative outperformance .

* Mirroring the benchmark index, the Nifty PSU Bank witnessed buying demand from the lower level, resulting in formation of a hammer like candle for second consecutive day, indicating a potential sign of reversal . Going ahead, closing above the mark of 5910 being the identical high of previous two sessions will be the initial sign of pause in downward momentum and carry the index towards the mark of 6140 , being 61 . 8 % retracement mark of the recent (6387 -5748 ) .

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