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Nifty : 24399 

Technical Outlook

Day that was…

The benchmark witnessed rangebound activity and settled at 24399, down 36 points or 0.15%. The market breadth turned negative with A/D ratio of 1:1.6 as boarder market relatively underperformed. Sectorally, financials, healthcare outshone while FMCG, realty extended corrective move

Technical Outlook:

* The index continued to consolidate in the vicinity of key support of 100 days EMA over second session in a row. Daily price action formed a doji like candle, indicating elevated volatility amid stock specific action.

* The Nifty has formed an identical lows around 100 days EMA. Going forward, holding above past two sessions identical low would keep pullback option open towards 24900 mark. 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 : 51531

Technical Outlook

Day that was :

Bank Nifty regained upward momentum after three sessions decline . Bank Nifty settled the session at 51531 , up 0 . 6 % . Meanwhile, PSU Banks relatively outperformed by gaining 1 . 2 %

Technical Outlook:

*  The index pared initial gains and settled the session near previous sessions high . As a result, daily price action formed a bull candle carrying higher high -low, indicating pause in corrective bias

*  We believe, the index is forming a higher base above 100 days ema while consolidating in the broader range of 52500 - 50000 in coming weeks . Key point to highlight is that the ratio chart of Bank Nifty / Nifty has been inching upward 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 staged a bounced after finding support from seven months falling support trend line . Thus, holding support trend line would keep pullback option open in PSU Banks

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