IGI Logo

Nifty :22959

Technical Outlook

Day that was…

Equity benchmark witnessed positive close and snapped eight consecutive days of negative closing to settle the day at 22959, up by 0.13%. However, the market breadth remained in favor of declines with the A/D ratio of 1:2. Sectorally, Pharma, Healthcare, Consumer Durable outperformed while IT, Auto and FMCG lagged.

Technical Outlook

* The daily price action resulted into a small bull candle as strong buying demand emerged from the multi support zone of 22800 on a closing basis after making an intraday low of 22725.

* Structurally, the index has held the mark of 22800 on multiple occasions in past two months being the lower band of the broader consolidation range (22800-23800) and currently it witnessed a positive divergence on daily RSI, indicating expectation of a technical pullback in coming weeks. Going ahead, follow through buying and a close above today’s high (22974) will be required to keep the pullback option open towards 23500, meanwhile major support 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 bounced from the 80% retracement mark of election days low to Sep-24 rally (47246-60926), while the Nifty small cap index bounced from the vicinity of election days low (14966), 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. 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 : 49259

Technical Outlook

Week that was :

The Bank Nifty experienced a volatile session and started the week on a positive note, where it closed at 49259 , up by 0 .32 % . The Nifty PSU Banking index outperformed the benchmark and closed the day at 5904 , up by 0 .54 % .

Technical Outlook :

* The Bank Nifty witnessed a gap down opening and continued the selling pressure from previous week . However, supportive efforts emerged from the vicinity of 61 . 8 % retracement mark of the previous up -move (47844 -50641), thus creating a piercing like candle, indicating buying demand from lower levels .

* Going ahead, a follow through buying and a close above the previous sessions high (49592 ) 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 candle, indicating a potential sign of reversal . Going ahead, closing above the previous sessions high of 6037 will confirm the same, while on the downside Monday’s swing low of 5748 will act as immediate support . Additionally, the daily RSI witnessed a positive divergence, indicating expectation of a technical pullback in coming weeks .

Please refer disclaimer at https://secure.icicidirect.com/Content/StaticData/Disclaimer.html 
SEBI Registration number INZ000183631