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Nifty : 25939

Technical Outlook

Day that was..

The equity benchmark endured its northbound journey and clocked a fresh All time high tracking firm global cues. The Nifty settled the Monday’s session at 25949, up 148 points or 0.6%. The market breadth remained positive with A/D ratio of 1.7:1 as broader market relatively outperformed. Sectorally, Auto, PSU Banks, realty outshone while IT took a breather

Technical Outlook:

* The index started the week on a buoyant note tracking positive global cues and gradually inched northward as the day progressed. The daily price action resulted into bull candle carrying higher high-low, indicating positive bias. In the process, Nifty midcap logged a fresh all time high

* The formation of higher peak and trough signifies buying demand at elevated support base. Key point to highlight is that along with private banks now PSU banks have regained upward momentum. We believe, revived traction in financials would drive index higher and set the stage for next leg of up move towards 26200 in the upcoming month. However, readers should note that over past 2 weeks Nifty has rallied ~1200 points which hauled short term oscillator in overbought conditions. Thus, any temporary breather at higher levels should be capitalized as incremental buying opportunity as strong support is placed at 25300. Our positive bias is validated by following observations:

* a) Last few sessions, large caps have relatively outperformed Smallcap category which is reflected in weak breadth. Fed’s 50 bps cut has put spotlight on dollar index which is expected to weaken. Technically, its already in sequential downtrend. However, decisive breach of 100 mark would lead to sharp and quick decline towards 98 and would be positive in terms of global liquidity especially for EM including India. Consequently, large caps may remain in focus going forward

* b) On expected lines, ratio chart of BankNifty / Nifty staged a strong rebound from cycle low. As a result, Bank Nifty scaled back to life highs led by large private banks. With banks having significant weightage on Nifty, strength in corporate banks and large NBFCs would act as tailwind for current uptrend. PSU Banks have also achieved price wise maturity of uptrend and provide favourable risk-reward. We expect, Bank Nifty to gradually head towards 54800 while strong support is placed at 52800

* The buying demand at elevated base makes us revise support base at psychological mark of 25300 as it is placement of 20 days EMA coincided with last week’s low.

Nifty Bank : 54105

Technical Outlook

Day that was :

Nifty Bank index continued its winning streak for eighth successive session helped by large PSU banks . PSU bank index gained > 3 % for the day . Nifty Bank gained 312 points or 0 .58 % to close at 54105

Technical Outlook :

* The Index opened on a flat note on Monday and then remained sideways in first half of session before gaining further ground in second half . Price action formed a smaller bull candle with higher high -low, indicating slow down in momentum after eight session gains while maintaining positive bias . Although price is making higher high, daily momentum indicators appear overbought and may lead into slow down in momentum . Same will however be confirmed upon breach of previous session low

* Going forward, some volatility near life highs may not be ruled out . However, dips are expected to attract buying and eventually lead index towards 54800 as it is 138 . 2 % retracement of the recent correction (53357 -49727 ) . Meanwhile, given the strong momentum, we have revised short term support levels to 52800

* PSU banks oversold and expected to attract buying demand near their long term mean . Apart from technical oversold conditions, potential of lower interest rates are expected to act as tailwind for PSU banks .

* Price structure : Current up leg in Bank Nifty is of higher magnitude (50369 -54197 ) as compared to previous up leg (49654 -51750 ) indicating improving price structure and corroborates bullish view

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