02-04-2024 10:05 AM | Source: ICICI Direct
The index kick started the week with a positive gap (22326-22455) - ICICI Direct

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Nifty : 22462

Technical Outlook

Day that was…Equity benchmarks started the FY25 on a positive note tracking firm global cues. The Nifty settled Monday’s session at 22462, up 135 points or 0.6%. The market breadth remained positive with A/D ratio of 7:1 as broader market relatively outperformed the benchmark. Nifty midcap gained 1.7% while Nifty small cap zoomed 3.2%. Sectorally, metal, financials, realty outshone while auto, FMCG took a breather

Technical Outlook

The index kick started the week with a positive gap (22326-22455) and subsequently traded above the same throughout the day. As a result, daily price action resulted into small bull candle, indicating continuation of upward momentum

• Going ahead, we expect index to resolve higher and gradually head towards 22900 in coming weeks. Empirically, in General election year, index has a tendency to bottom out in the first quarter of the calendar year, followed by rally (minimum 14% rally from lows) towards General election outcome in each of seven instances over past three decades. In the current scenario, we expect index to maintain the same rhythm as index has already undergone corrective phase in the first quarter and formed a higher base. Thereby, setting the stage for next leg of bull rally towards 23400 by Election outcome. In the process, 22100 would act as immediate support which we expect to hold. Our positive bias is further validated by following observations:

• A) Bank Nifty: The robust price structure of heavy weight banking constituents signifies inherent strength that bodes well for leadership of BFSI in next leg of up move

• B) Seasonality: In an election year, April has been positive on 5 out of 7 occasions over past three decades with an average gain of 3.8%

• C) Firm Global Cues: Buoyancy in global market confirms strength in equities as US, UK markets are trading at life highs. We expect, Nifty to perform in tandem with the global peers as domestic market have direct correlation with the global peers

• Historically, bull market corrections in Nifty Midcap and small cap indices tend to be average 12% -15% respectively. In current scenarios, with 9% and 16% correction behind us we expect these indices to undergo a base formation over next few weeks. Post recent correction many quality companies have approached their key support ahead of earning season

• The formation of higher peak and trough above 50 days EMA highlights inherent strength that makes us confident to revise support base upward at 22100 as it is confluence of:

• A) 20 days EMA placed at 22140 • B) 50% retracement of current up move (21710-22529), at 22120


Nifty Bank: 47578

Technical Outlook

Day that was : The Nifty Bank index started the first day of FY25 on a buoyant note and settled the session at 47578 up 454 points or 1 % . PSU banks relatively outperformed by gaining 1 . 5 % .

Technical Outlook

• The Index witnessed a range bound activity after witnessing gap up opening . As a result, daily price action formed a bullish belt hold line candle carrying higher high -low, indicating continuation of positive momentum

• The sustenance above 20 days EMA highlights inherent strength that makes us confident to believe index will resolve above key milestone of 48000 and gradually retest the life high of 48600 in coming month . In the process, we expect index to hold the key support of 46400 . Thus, buying dips would be the prudent strategy to adopt

• Structurally, index has undergone healthy consolidation phase since late December 2023 which has set stage for next up move . Within this phase index has maintained its rhythm of forming higher lows near 52 -week ema indicating continuation of structural uptrend

• Formation of higher trough on the weekly chart signifies robust price structure that makes us revise the support base upward at 46400 as it is confluence of :

• A) 61 . 8 % retracement of recent up move (45828 -47440 )

• B) last week’s low is placed around 46530


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