The Bank Nifty witnessed range bound action where it traded within the array of 900 points throughout the week - ICICI Direct
Nifty :22796
Technical Outlook
Week that was…
Indian equity benchmarks extended losses over second consecutive week tracking muted global cue and settled on a flat note at 22796 , down by 0.58%. The market breadth remained in favor of declines with the A/D ratio of 1:2. The broader market outperformed on weekly basis where both the Nifty midcap index and the Nifty small cap index closed on a positive note, up by 1.68% and 1.49% respectively. Sectorally, Metal, Energy and PSU Bank outperformed for the week while Auto, Pharma and FMCG were the laggard.
Technical Outlook:
* Nifty opened the week with a gap down where buying demand emerged and rose towards 23000 mark but unable to hold those levels and received profit booking and closed the week near opening resulting in the weekly price action into small bear candle with shadows on either side indicating continuation of the corrective bias. Due to global sell off Nifty is witnessing gap down near 22700 levels, Strong support is place at 22200 being 80% retracement of (21137-26277) remains important to watch out for in upcoming truncated monthly expiry week. Meanwhile, to pause the ongoing corrective phase a decisive close above the previous day’s high would be the pre-requisite.
* The key point to highlight on the broader market front is that, past two decades data suggest, in a bull market phase, Nifty midcap and small cap have a seen average correction of 27% and 29%, respectively. In current scenario, we believe both indices are approaching extremes of their bull market correction as Nifty midcap and small cap have already corrected 20% and 24%, respectively, indicating limited downside going ahead. Hence, focus should be on accumulating quality stocks (backed by strong earnings) in a staggered manner.
* 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) Breadth Indicator: The market breadth has approached the bearish extreme as % of stocks (within Nifty 500 universe) above 50 and 200 days SMA has approached their bearish extreme of 13 and 5 respectively during last week. Historically, such bearish readings have paved the way for durable bottom in subsequent weeks.
* b) Momentum indicator: Past two decades data suggest that, the weekly RSI below 30 suggest oversold condition for the Nifty midcap and small cap indices. Which have been tested only on six occasions, resulting into 20% up move in subsequent three months, wherein drawdowns have been limited to 5%. With recent reading of 33 we believe; the risk reward remain favorable as pullback from bearish extremes cannot be ruled out.
* c) The US Dollar index has been sustaining below 107 marks for the second consecutive week. Further weakness would be beneficial for emerging markets.
* d) Further development on ease off in geopolitical worries would bring some stability in equity markets.
Nifty Bank : 48981
Technical Outlook
Day that was…
The Bank Nifty witnessed volatile action throughout the week, where it concluded the week on a flat note at 48981 , down by 0 .24 % . However, Nifty PSU Bank index outperformed the benchmark index and closed the week on a positive note at 5970 , up by 1 .67 % .
Technical Outlook:
* The Bank Nifty witnessed range bound action where it traded within the array of 900 points throughout the week . The weekly price action created a high wave candle, indicating breather amid elevated volatility .
* Key point to highlight is that, the index is witnessing slower pace of retracement as over past 2 weeks it retraced 61 . 8 % of preceding 2 weeks up move (47844 -50641 ) . Thus, making us believe that the ongoing breather will make market healthy and form a higher base, paving the way for a fresh up -move once it concludes .
* Structurally, the Bank Nifty is showing resilience as it did not breach the previous swing low contrary to the Nifty index and 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 50640 being the recent swing high . 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 .
* In tandem with the benchmark index, the Nifty PSU Bank index witnessed buying demand from the lower band of falling channel, thus outperforming the benchmark move and closing the week with a bullish bias . Going ahead, we 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 .
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