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Nifty :23250

Technical Outlook

Day that was…

Indian equity benchmarks closed the weekly expiry session on a subdued note tracking reciprocal tariff announcement by U.S. and settled at 23250, down 82 points. Market breadth favored the advances, with an A/D ratio of 2.5:1, where broader market relatively outperformed. Sectorally, Pharma, Healthcare and PSU Bank were outperformer, whereas IT, Auto and Metal were laggards.

Technical Outlook:

* The Nifty opened gap-down (23332-23150) and staged a strong recovery (160 points) making higher-high-low in the first half and traded within 58 points range throughout the day recovering most of the intraday gains. As a result, the daily price action formed small bull candle, indicating buying demand from lower levels.

* The benchmark index is opening gap-down tracking weak global cues. US equities witnessed worst single day decline since 2020. Key point to highlight is that despite global weakness, the index has shown resilience by holding Tuesday’s low and witnessing a slower pace of retracement. Over the past seven sessions, it has merely retraced 50% of the preceding six-day up-move (22353-23869). Going forward, 22800 (on a closing basis) will be a key support level. While tariff-related concerns may induce volatility couple with upcoming RBI Policy and earning season, absorbing this anxiety could help the index establish a higher base. Some profit booking over the next couple of sessions cannot be ruled out but should be viewed as a healthy retracement rather than a reversal. For further upside, the index needs to close and sustain above previous day’s high, which could pave the way for a move toward 23800. Hence stock specific action is likely to continue. Our constructive bias is validated by following observations:

* a. The ratio chart of Nifty/Dow Jones has recorded a breakout from a six-month falling channel, indicating the domestic market could relatively outperform US equities going forward.

* b. The cool off in US 10-year Yields, Dollar Index and Brent crude augurs well for emerging markets by easing inflation and boosting sentiment.

* c. Upcoming RBI policy would be the key monitorable which would further boost the market sentiment

* Structurally, after a steep 16% correction over the last five months, market sentiment and momentum indicators have rebounded from bearish extremes. The percentage of stocks trading above their 50-day SMA surged from 7% to 60% in Thursday’s session, highlighting a strong improvement in breadth. The index also retraced its previous 19-session decline in just 14 sessions, confirming a faster pace of retracement. After a ~1,900-point rally, the Nifty faced resistance at 23800, coinciding with 61.8% retracement of previous fall (24858-21964). Any pullback from here on should be considered as healthy retracement, which will allow the index to form a higher base around 22800 mark. Hence, the focus should be on accumulating quality stocks with a medium-term perspective.

* On the broader market front, Nifty Midcap and Small cap indices have seen a rebound after approaching maturity of price and time wise correction. Historically, maximum average correction in Midcap and small cap indices have been to the tune of 27% and 29% while time wise such correction lasted for five months. Subsequently, both indices have seen 28% returns in next six months.

* Formation of higher peak and trough indicates buying demand at elevated support base, which makes us revise the support levels at 22800, which represents a 61.80% retracement of the upmove from (21964-23869) and falling trendline support. This level is expected to act as a strong cushion, ensuring that dips remain buying opportunities rather than trend reversals

Nifty Bank : 51593

Technical Outlook

Day that was

The Bank Nifty continued its bullish momentum despite uncertainty related to US tariff announcement and settled the Thursday’s session on a positive note at 51593 , up by 0 .48 % . Meanwhile, the Nifty PSU Bank index outperformed the benchmark and settled the day at 6246 , up by 2 % .

Technical Outlook

* The Bank Nifty witnessed a gap -down opening, however it soon witnessed supportive efforts from the previous days low and recouped the intraday losses, thus closing on a positive note . The daily price action resulted in a sizeable bull candle, indicating positive bias .

* Key point to highlight is that, despite the anxiety following US tariff announcement, the index managed to hold on the previous weeks low of 50796 coupled with the previous gap area (50672 -50796), indicating inherent strength . Moreover, the index is witnessing shallow retracement following the sharp up -move of ~ 9 % from the multi support zone of 47800 where it has not even retraced 38 . 2 % , indicating robust price structure . Going ahead, we expect the index to move above the recent swing high of 52063 , which wil l eventually open the gates for further up -move towards 52500 mark, being 80 % retracement of previous fall (53888 -47703 ) . In the process bouts of volatility will prevail, amid RBI policy and upcoming result season . Hence, buying on dips would be the prudent strategy to adopt with the strong support placed around 50000 mark, with stock specific action likely to continue .

* Structurally, the Bank Nifty bounced from the vicinity of 100 -week EMA after forming a double bottom pattern . Additionally, the swift up move in banking space helped Bank Nifty to surpass past two months high, suggesting inherent strength . The current up move of 9 % is strongest since September that confirms resumption of uptrend . As a result, previous five -month “sell -on -rally” approach has now shifted to a “buy -on -dips” strategy, amid structural improvement .

* In tandem with the benchmark index, the Nifty PSU Bank index witnessed a breakout to the seven days consolidation where it was trading in a tight range of ~250 points, thus continuing with the higher high low formation . Key point to highlight is that, the index witnessed slower pace of retracement over past seven days and merely retraced 38 . 2 % of preceding seven days of up -move (5740 - 6366), indicating relative outperformance . Going ahead, we expect the index to continue its outperformance and head towards the mark of 6900 being 80 % retracement of the previous fall (7248 -5530 ) . On the other hand, the mark of 6000 will provide immediate support being 50 % retracement of recent up -move(5530 -6366 ) .

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