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Nifty : 22302

Technical Outlook

Day that was…

Equity benchmark continued to inch southward despite firm global cues. The Nifty lost 140 points to settle the session at 22302. The market breadth remained in favour of declines with A/D ratio of 1:3 as broader market relatively underperformed. Barring FMCG and IT all major indices ended in red weighed down by metal, auto, pharma, PSU Banks

Technical Outlook

* The index extended its corrective bias and drifted downward as intraday pullbacks were short lived. The daily price action resulted into bear candle carrying lower high-low, indicating corrective bias.

* The index is undergoing healthy retracement above 50 days EMA (22240) which has been held since November 2023. Key point to highlight is that the India VIX (which gauge the fear in the market) has recorded 52 weeks high of 17.64, indicating rise in volatility. Historically, India VIX has a tendency to rise ahead of Election and eventually it fizzles out post election outcome. During MAY 2019, rise in VIX index resulted into decline in index that in turn helped index to form a higher base and set the stage for next leg of up move. Thus, ongoing corrective decline should not be considered as negative instead capiatalise it as buying opportunity in quality stocks.

* We expect index to surpass the 22800 mark and accelerate move towards our earmarked target of 23400 by June. In the process, bouts of volatility ahead of general election phase can not be ruled out amidst progression of Q4 earning season. Our constructive bias is validated by following observations:

A) Bank Nifty retested the 3 ½ month consolidation breakout while sustaining above 50 days EMA, highlighting robust price structure. On relative front, Bank Nifty is expected to outperform Nifty

B) Contrary to adage of sell in May and go away, Indian equities have delivered positive returns in May month during General election years in four out of past five instances since CY1999. Minimum returns were 1.5% while average was 14% 

C) Brent prices have given breakdown from five month rising channel indicating that upsides are capped around $92. Further declines towards 75-78 likely in coming month

Formation of higher peak and trough makes us confident to retain support base at 22000 is based on confluence of:

 a) 80% retracement of recent up move 21778-22794

 b) Rising trend line drawn adjoining rising trend line drawn adjoining Dec-23 to Jan 24 lows

Nifty Bank: 48285

Technical Outlook

Day that was :

The Nifty Bank index extended its losing streak for fifth session in a row on Tuesday . Nifty private and PSU bank index declined 1 . 5 % and 2 . 3 % respectively . Index closed at 48285 , down 610 points or 1 .25 %

Technical Outlook :3

* Index commenced session on weak note and continued to slide down resulting in a sizeable bear candle with lower high -low indicating continuation of corrective decline . In the process index retraced preceding eight session rally by 50 % over past four sessions helping daily stochastics to ease towards reading of 27 . For index to indicate pause in downward trend, it has to sustain above preceding session high

* Structurally, current decline from life highs is a healthy retracement and we maintain our structural positive stance on index . Recent high and psychological mark of 50000 remains immediate target for Nifty bank index . Meanwhile index is expected to relatively outperform . However, after recent 7 % rally index is expected to undergo higher base above 48000 levels which will set stage for next up move . Use buy on decline strategy with focus on corporate that are are expected to do well

* Key observation has been that Bank Nifty/Nifty relative performance ratio chart indicates strong outperformance from Bank Nifty over next 3 - 4 months . Since 2008 , in all six instances, whenever relative ratio line turned up from cycle low, Bank Nifty outperformed by 5 % over three -four months period

* We revise key immediate support for Index at 48000 as it is confluence of : 

* Last Fridays low 

* Value of rising 20 -day ema at 48238 

* 50 % retracement of past six session gains at 48026

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