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Nifty : 20070

Technical Outlook

The index recouped initial losses and closed at record highs. The daily price action resulted into a bull candle, indicating continuation of positive bias.

• Going ahead, we reiterate our positive bias and expect Nifty to gradually head towards revised target upward at 20400 in coming weeks. Key point to highlight is that, the index has retraced past 29 sessions decline (19991-19223) in just seven sessions. The temporary breather after faster pace of retracement would make market healthy and pave the way for next leg of up move. Thus, buying on dips would remain the prudent strategy to adopt as immediate support is placed at 19600. Our positive bias is based on following observations:

• A) Faster retracement indicates structural improvement

• B) Sectors like Bank Nifty and IT which carries 50% weightage in Nifty have regained upward momentum which would provide impetus for next leg of rally in Nifty

• On the broader market front, it is important to highlight is that, since April 2023 on multiple occasions Nifty midcap and small cap indices have managed to hold the 20 days EMA since April 2023. Both indices have maintained the same rhythm by finding supportive efforts from 20 days EMA. Therefore, going head 20 day EMA (placed at 39500) would be the key monitorable as holding above the same would keep pullback option open else extended correction.

Structurally, we are in a secular bull market depicted by the acceleration of upward momentum in broader market space post breakout from 5 years consolidation of Nifty Midcap vs Nifty ratio line. In a secular bull market secondary correction is a common phenomenon wherein historically midcap index corrected to the tune of 8-10%. Therefore, ongoing correction should be utilised to construct a quality midcap portfolio from medium term perspective.

• The formation of higher peak an trough supported across sector participation makes us confident to revise support base at 19600 as it is confluence of:

• a) 50% retracement of current up move (19223-20008), at 19615

• b) Earlier resistance of 19600 will now act as support as per change of polarity concept

• c) 20 days EMA is placed at 19640 

Nifty Bank: 45909

Technical Outlook

• The price action for the day formed a strong bull candle with higher high -low indicating continuation of uptrend as index surpassed short term hurdle of 45800 in the process on expected lines

• Going forward, we expect index to eventually head towards life highs of 46369 over next few weeks therefore buying dips template is recommended with elevated support at 44500 levels

• Our view is backed by following key observations

• Last weeks low placed at 44500 that coincide with rising 100 -day average

• PSU banks are already outperforming and large caps are expected to catch up further steam

• Private banks with significant weightage are oversold and at key supports . Expect them to bounce back which will lift banking index higher

• PSU Banking index is expected to continue its relative outperformance as index has recently concluded breakout from multi year highs

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