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Nifty :22929

Technical Outlook

Day that was…

Equity benchmark snapped two weeks winning streak and declined 2.7% during the week to settle at 22929, amid rise in volatility. The market breadth remained in favor of declines with the A/D ratio of 1:5, as the broader market underperformed the benchmark index, where both Smallcap100 and Midcap100 indices lost 9.4% and 7.4% for the week respectively. Sectorally, all major indices ended in red weighed down by Realty, Consumption and PSU.

Technical Outlook

* The Nifty opened the week on a flat note and witnessed a sharp selling throughout the week where the intermediate pullbacks were short-lived which led index to close with a bearish bias. The weekly price action, resulted into a sizable bear candle carrying lower high-low, indicating downward bias. However, global markets outperformed as Dax and Hang Seng jumped 3% and 7%, respectively

* The Nifty is currently hovering around lower band of past five weeks consolidation range 23800-22800. Going ahead, 22800 would be key level to watch, as a decisive close below 22800 would lead to extended correction towards the range of 22500-22200. Meanwhile, to pause the ongoing down move, Nifty need to sustain above 23300 on a closing basis.

* Key point to highlight is that, at current juncture, % of stocks above 50 SMA and 200 SMA within Nifty 500 Universe have entered the bearish extreme zone of 14, indicating pessimism at its peak. Historically, such an extreme pessimism 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, 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 19% and 22% 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. Further decline 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 : 49099

Technical Outlook

Day that was :

The Bank Nifty snapped two weeks winning streak, after witnessing bearish momentum, thus declining 2 .19 % during the week to settle at 49099 . The Nifty PSU Banking index underperformed the benchmark, closing the week at 5998 , down by 5 .38 %

Technical Outlook :

* The Bank Nifty started the week with a gap -down opening and gradually declined throughout the week, thus erasing the previous weeks gains and ending the week with a bearish bias . The price action resulted in sizeable bear candle carrying lower high -low, indicating downward bias .

* Going ahead, a close above the previous sessions high (49592 ) would be the initial sign of a pause in the ongoing corrective phase, whereas a follow through buying will be required to resume the upward momentum where the initial resistance is placed at the mark of 50640 being the recent swing high . 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 ) . Additionally, the Bank Nifty index did not breach the previous swing 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 index, the Nifty PVT Bank witnessed gradual down move throughout the week and closed the week on a negative note . However, the PVT Bank index did not breach the previous weeks low, thus showing relatively outperformance compared to the benchmark index . Moving ahead, we expect the index to move towards the mark of 25600 being 80 % retracement of previous fall (26110 -23508), while the recent swing low of 24229 will be the immediate support

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