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Nifty : 24436

Technical Outlook

Day that was…

The benchmark continued with its downward momentum over third session in a row. Nifty settled Wednesday’s session at 24435, down 36 points or 0.15%. The market breadth turned positive with A/D ratio of 1.6:1 as boarder market relatively outperformed wherein midcap gained 0.6% while small cap index zoomed 1.25%. Sectorally, traction in IT, PSU banks helped index to minimize losses while pharma underwent profit booking

Technical Outlook:

* The index consolidated above key support of 100 days EMA throughout the day. Daily price action formed a small bull candle with sizable upper shadow. Meanwhile, formation of lower highlow signifies corrective bias amid stock specific action.

* The Nifty is currently poised at immediate support of 24400 that coincided with 100 days EMA. Hence, holding above the same would keep pullback open towards 24900 mark. However, to pause the ongoing corrective move index need to decisively close above previous sessions high of 24600. On the contrary, failure to hold 24400 (on a closing basis) would result into extended correction towards 23900 in coming weeks. In the process, stock specific action would continue amid progression of earning season.

* Key point to highlight is that, with past three week’s 7% correction, market breadth indicators of Nifty 500 universe have approached their medium term cycle lows as net of daily advance-decline has approached bearish extreme of -480 on Tuesday while % of stocks above 50 days SMA are hovering around 20, indicating oversold reading that augurs well for technical pullback in coming weeks

* Historically, over past two decades, in a bull market 7-10% correction is a common phenomenon. Buying in such scenario have been fruitful from medium term perspective. Hence, accumulating quality large caps would be the prudent strategy to adopt amid ongoing earning season as key support is placed at 23900 as it price parity of election outcome day decline of 9% coincided with August low of 23894

Nifty Bank : 51239

Technical Outlook

Day that was :

Bank Nifty index concluded weekly expiry session on a flat note . Bank Nifty settled the session at 51239 . Meanwhile, PSU Banks recouped intraday losses to settle Wednesday’s session on a positive note with a gain of 0 . 5 % Technical Outlook :

* The index traded in a narrow range after initial volatility . Consequently, daily price action resulted into small bull candle carrying lower high -low, indicating corrective bias amid elevated volatility

* Going ahead, we expect Bank Nifty to consolidate in the broader range of 52500 -50000 in coming weeks . Key point to highlight is that the ratio chart of Bank Nifty / Nifty has resolved higher after forming base at long term cycle lows, indicating relative outperformance

* Structurally, since July -23 , on 4 occasions Bank Nifty has maintained the rhythm of not correcting > 9 % and subsequently undergone base formation for next 2 - 3 weeks before unfolding next leg of up move . In current scenario, with 8 % correction already in place, we expect Bank Nifty to form a base and eventually outperform the Nifty

* The PSU bank index has recorded breakdown from six weeks base formation in the vicinity of 200 days EMA, indicating extended correction in PSU Banks

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