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Nifty :25758

Technical Outlook

Day that was… Equity benchmark extended losses over third session in a row and settled at 25758, down 82 point ahead of the crucial US Fed policy outcome. Broader market turned negative as midcap and smallcap declined 1%. Sectorally Metal, Oil & Gas, Pharma relatively outperformed while Consumer Durables, IT, Financials declined

Technical Outlook:

* The index started the session on a flat note. However, lack of follow through strength resulted into extended correction. Consequently, daily price action formed a bear candle and settled at 50 days EMA, indicating continuation of corrective bias

* Index is likely to open on a positive note tracking positive global cues amid Fed policy outcome. The index has been broadly consolidating in 26300-25700 zone over past four weeks. A decisive breakout on either side of the range would dictate the further course of action. We expect volatility to remain elevated in the upcoming sessions tracking US Fed rate outcome coupled with development on USIndia Trade deal. Thereby, holding 25700 levels on a closing basis would keep pullback options open. Going forward, Follow through strength and a decisive close above psychological mark of 26000 could confirm pause in downward momentum and open the door for a retest upper band of consolidation of 26,300 in the coming weeks. Meanwhile, 25,700 would continue to act as immediate support being 61.8% retracement of Nov-Dec rally (25318-26325) coincided with 50 days EMA

* The Smallcap index rebounded from the vicinity of lower band of its falling channel, with the stochastic indicator in oversold territory hinting at the possibility of a near-term technical bounce. However, a decisive close above the previous session’s high is missing. Hence, follow through strength would confirm the reversal.

* December Seasonality: Historical data exhibit that seasonality favour bulls with ~70% success rate wherein average returns have been to the tune of 2.5% Key Monitorable for the next week:

* US–India Trade Talks: A visiting US trade delegation may unlock breakthroughs. A positive outcome could boost market sentiment and possibly bring FIIs back

* India CPI Print

* Rupee Watch: Indian Rupee is approaching upper band of 7 years rising channel, indicating impending trend reversal which would help to revive the market sentiment

Intraday Rational:

* Trend- Lack of follow through strength above previous sessions high signifies corrective phase

* Levels: Sell on rise near previous sessions highs of 26060

Technical Outlook

Day that was:

Bank Nifty settled Wednesday’s session on a negative note at 58960, down 0.4%. The Nifty PSU Bank index relatively underperformed losing ~1%.

Technical Outlook:

* The index opened the session on a flat note. However, selling pressure at higher levels dragged index near last session’s low of 25880. Consequently, the daily price action formed a small bear candle, indicating lack of follow through strength to last sessions pullback

* In today’s session, Index is likely to witness positive opening tracking firm global cues. The index has been largely oscillating in a 60000-58600 range while sustaining around its 20-day EMA. The absence of decisive close above previous session high has resulted into prolonged consolidation. Hence, for a meaningful pullback to materialize, index need to decisively close above previous session high of 59440 which would open the door for pullback towards 60000. Failure to do so would result into extension of time wise consolidation which would make market healthy and pave the way to challenge All Time High in coming weeks.

* Historically, in the past two decades, there have been 17 instances where Bank Nifty delivered double-digit gains within four months after a decisive breakout above its previous twomonth high. The index has been maintaining the same rhythm as after breaching two months high in October the index has been maintaining higher high-low formation and clocked a fresh All Time High. Mirroring the historical evidences, we expect Bank Nifty to maintain the same rhythm in the coming months.

* After recent outperformance, the PSU Bank Index is undergoing healthy consolidation wherein it has retraced back to its 50-days EMA and retesting 16 months consolidation breakout at 8050. As per change of polarity concept earlier resistance is now acting as support. Hence, focus should be on accumulating quality PSU banking stocks that are backed by strong Q2 earnings

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