IGI Logo

Nifty :22913

Technical Outlook

Day that was…

Equity benchmark experienced a volatile expiry session where it settled the day on a flat note at 22913 , down by 20 points. However, the market breadth remained in favor of advances with the A/D ratio of 2:1, as the broader market outperformed where both the Nifty midcap index and the Nifty small cap index closed on a positive note, up by 1.26% and 1.43% respectively. Sectorally, Metal, PSU Bank and Oil & Gas outperformed for the day while Financial Services, Nifty Bank and Private bank were the laggard.

Technical Outlook:

* After initial decline Nifty staged a gradual recovery which trimmed most of the intraday losses. The daily price action resulted into small bull candle supported by higher low formation and managed to hold the multi-support mark of 22800 for the fourth consecutive session, thus indicating strong buying demand emerging from lower band of the broader consolidation range (22800-23800).

* Structurally, the index is consolidating in a contracting range of 22800-23000 since last four trading sessions, along with positive divergence on daily RSI. However, for a meaningful pullback to materialize, Nifty need to witness follow through strength and close above 23000 which is the range of past four days high. Meanwhile, on the downside strong support is placed at 22500.

* In the current corrective phase, the market breadth indicator is showcasing extreme pessimism as the, % of stocks above 50 SMA and 200 SMA within Nifty 500 Universe witnessed bearish extreme zone of 13 in current week. 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.

* Key point to highlight is that, both the Nifty midcap and nifty small cap index closed above the previous session high and got the follow through buying which was not the case since last nine consecutive days. 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 : 49344

Technical Outlook

Day that was…

The Bank Nifty witnessed a rangebound action post up -move observed in Wednesday’s session . The benchmark index concluded the session at 49344 , down by 0 .48 % . Meanwhile, Nifty PSU Bank index outperformed the benchmark index and closed the day on a positive note at 6052 , up by 1 .70 % .

Technical Outlook:

* The Bank Nifty traded in a tight range of 300 points, creating an inside bar candle, thus indicating breather post up -move observed in Wednesday’s trading session .

* Going ahead, we expect the index to continue its ongoing pullback and eventually head towards 50640 which is the recent swing high, a follow through buying above which will lead to a further up -move towards the mark of 51600

* 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 strong support is placed around the swing low of 47844 and any dip witnessed hereon should be capitalized as a buying opportunity in quality stock in a staggered manner .

* Structurally, the Bank Nifty index did not breach the previous swing low contrary to the Nifty index, and resumed its up -move by forming higher high low pattern from the key retracement mark of 61 . 8 % , thus dwindling the downward momentum .

* In tandem with the benchmark index, the Nifty PSU Bank index witnessed a follow through buying and continued the bullish momentum from the previous trading session . The higher high low formation along with positive divergence on daily RSI, makes us believe that the index will continue to resolve higher towards 6260 being 80 % retracement mark of the recent fall (6387 -5748 ) . Meanwhile, immediate support is placed at 5748 , being the recent swing low .

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