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Nifty :23045

Technical Outlook

Day that was…

Equity benchmark experienced a volatile session where it settled the day on a flat note at 23045, down by 0.12%. The market breadth remained in favor of declines with the A/D ratio of 1:1.5, as the broader market mirrored the benchmark move, where both Smallcap100 and Midcap100 indices closed the session on a flat note. Sectorally, Metal, Banking and Financial services gained for the day while Realty, Oil & Gas, Pharma, IT and Consumer Durables were the laggard.

Technical Outlook

* The daily price action resulted in a long legged doji candle after five consecutive days of fall, thus indicating strong buying demand from the vicinity of previous swing low of 22786.

* Going ahead, the formation of long legged doji candle near the previous low signifies the supportive efforts emerged from the lower level and a close above the high of doji candle (23145) will be the initial sign of pause in downward momentum. We believe that market should enter into a base formation in the vicinity of 52-week EMA, which will eventually pave a path towards the recent swing high of 23800. Else, failure to do so will result in extended consolidation in the broader range of 22800-23800. Meanwhile, bouts of volatility cannot be ruled out amid anxiety around US Tariff related developments. Meanwhile, Prime Minister Modi’s visit to the US would also be a key monitorable. Hence, focus should be on accumulating quality stocks on dips backed by strong earnings.

* A key point to highlight is that, contrary to benchmark move, Bank Nifty has been showing resilience as it protected previous week low and managed to close above it relatively outperforming the benchmark, while the Bank Nifty/Nifty ratio chart is bouncing from long-term cycle lows, indicating outperformance going ahead.

* Historically, within a structural bull market, secondary corrections are common. With the current 13% correction in place, the index has approached both pricewise and time-wise correction levels. Structurally, since 2002, bull market corrections have averaged 14%, while time-wise, the index has not recorded a negative monthly close for more than 3-4 months. Over the past four months, the index has corrected 13%, absorbing pessimism around both global and domestic uncertainties, leading to bearish extreme readings on sentiment and momentum indicators, suggesting an impending pullback.

* On the global macro front, amidst tariff-related anxiety, the US Dollar Index made a failed attempt to surpass the 110 mark and is currently trading around 108 levels. Meanwhile, Brent crude extended losses for the third consecutive week and is hovering around $76. A falling US Dollar Index and Brent crude prices augur well for risk-on sentiment in emerging markets.

* On the broader market front, Nifty Midcap witnessed a sharp recovery after finding supportive efforts from the vicinity of 80% retracement of previous upmove (47246-60926), creating a long legged doji candle. Empirically, over past two-decade Midcap corrections have been limited to 20%, with the current 19% correction in place, as per historical data, the downside seems to be limited, indicating a near completion of price wise maturity. Additionally, the breadth indicator (% of stocks above 50 days SMA of Nifty 500 Universe) has reached at bearish extreme level of 10. Since covid lows, such an extreme reading leads to short term reversal.

Nifty Bank : 49479

Technical Outlook

Day that was :

The Bank Nifty snapped its four -day losing streak and closed the day on a positive note at 49479 , up by 0 .24 % . The Nifty PSU Banking index outperformed the benchmark, closing the day at 6052 , up by 0 .84 %

Technical Outlook :

* The Bank Nifty opened on a flat note and witnessed selling pressure in the first half . However, buying demand emerged from the vicinity of 61 . 8 % retracement of previous up -move (48064 -50642), which resulted into a sharp recovery . In the process, the Bank Nifty created a hammer type candle, indicating supportive efforts from lower levels

* Going ahead, closing above the previous sessions high (49906 ) will indicate a pause to the ongoing corrective phase and a follow through buying will be required to resume the upward momentum where the initial resistance is placed at the mark of 50640 which is the recent swing high . On the other hand, the key support is placed at 48734 being the recent swing low coinciding with 61 . 8 % retracement of recent up -move (47844 -50641 ) . Additionally, the Bank Nifty index did not close below the previous weeks low contrary to the Nifty, thus, showing relative outperformance .

* The Bank Nifty has witnessed a breakout from the three -week base 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 48734 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 48734 will act as a support .

* Mirroring the benchmark move, the Nifty PSU Bank witnessed buying demand from the previous swing low of 5866 , creating a hammer type candle, supportive efforts from lower levels . Moving ahead, a close above previous sessions high of 6160 will be the initial sign of pause in downward momentum and a higher high low formation will indicate a resumption in the upward momentum towards the mark of 6400 , being the recent swing high as well as the 38 . 2 % retracement of the previous fall (7248 -5858 ) .

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