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Nifty : 20926

Technical Outlook

* The fag end buying demand helped index to recoup intraday losses and settled the session on a flat note. The daily price action resulted into a doji like candle, indicating rise in volatility wherein stock specific action prevailed

* The index is undergoing healthy consolidation after ~1200 points rally seen in just seven sessions. We believe, ongoing breather would help index to cool off the overbought conditions and pave the way to gradually head towards 21400 in coming weeks. Thereby, buying dips would be the prudent strategy to adopt as we expect index to hold the key support of 20500 in coming sessions. Our positive bias is further validated by following observations:

* A) The Banknifty index has witnessed faster pace of retracement as it retraced 14 weeks decline in just six weeks, indicating rejuvenation of upward momentum. BFSI carries 35% weightage in the Nifty which would provide impetus for next leg of up move

* B) Declining yields, suppressed Brent crude oil prices and stable currency (INR/USD) along with strong institutional flows would act as tailwinds

* The formation of higher peak and trough along with shallow retracement signifies elevated buying demand that makes us confident to revise support base at 20500 as its is confluence of 38.2% retracement of past three weeks rally (19768-21006) coincided with last week’s low of 20508

Nifty Bank: 47092

Technical Outlook

* The price action formed a hammer like candle with long shadow indicating buying demand during intraday declines after index underwent profit taking over past two sessions

* Going forward, we expect prices to move towards 48000 in a non -linear fashion as some consolidation along the way would be a healthy sign . Target of 48000 is based on 138 . 2 % retracement of entire decline (46369 -42105 ) . Stick to buy on dips strategy with key support now being revised at 45900 being 38 . 2 % retracement of past week rally

* Structurally, index posted faster retracement of entire July -October decline in just four weeks highlighting robust price structure . Further participation of both private/public sector banks make the rally more dependable in terms of having further legs . We expect PSU banks to relatively outperform over medium term as the PSU bank index has given a multi year breakout

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