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Nifty : 26004

Technical Outlook

Day that was..

The equity benchmark concluded monthly expiry session on a buoyant note tracking firm global cues. Nifty zoomed 212 or 0.8% to settle the session at 26216. However, market breadth turned negative as with A/D ratio of 1:1.3 as small cap index relatively underperformed. Sectorally, auto, metal, financials outshone while consumer durable took a breather

Technical Outlook:

* The index started the session on a positive note and gradually inched northward as the day progressed. As a result, daily price action formed a bull candle carrying higher high-low, indicating continuation of positive momentum.

* The traction in index heavy weight helped index to resolve higher and approached our target of 26200, on expected lines. The series of higher peak and trough signifies elevated buying demand that makes us maintain our positive bias amid sectoral rotation. Key point to highlight is that, past 3 weeks Nifty has rallied >1350 points that hauled daily stochastic oscillator in overbought territory (placed at 99), indicating possibility of temporary breather at higher levels can not be ruled out. Only a decisive close below previous session low would result into pause in upward momentum till then continuation of upward momentum. Our positive bias is further validated by following observations:

* a) Last few sessions, large caps have relatively outperformed Smallcap category which is reflected in weak breadth. Fed’s 50 bps cut has put spotlight on dollar index which is expected to weaken. Technically, its already in sequential downtrend. However, decisive breach of 100 mark would lead to sharp and quick decline towards 98 and would be positive in terms of global liquidity especially for EM including India. Consequently, large caps may remain in focus going forward

* b) On expected lines, ratio chart of BankNifty / Nifty staged a strong rebound from cycle low. As a result, Bank Nifty has been scaled back to life highs led by large private banks. With banks having significant weightage on Nifty, strength in corporate banks and large NBFCs would act as tailwind for current uptrend. PSU Banks have also achieved price wise maturity of uptrend and provide favourable risk-reward. We expect, Bank Nifty to gradually head towards 54800 while strong support is placed at 52800

* The buying demand at elevated base makes us revise support base at psychological mark of 25800 as it is 10 days EMA

Nifty Bank : 54375

Technical Outlook

Day that was :

Nifty Bank index gained on Thursday amid continued buying in private banks and PSU banks index gaining 1 % . Index gained 274 points or 0 . 5 % to close at 54375 Technical Outlook :

* The Index commenced session on muted note and then gaine d further ground as the session progressed . In the process price action formed a bull candle with higher high low to hit new highs indicating continuation of positive bias despite overbought readings . As noted earlier, private banks have seen good rally in the short term and therefore may be subject to some profit taking which may result into some breather in coming sessions . However, index need to close below previous session low to indicate such pause . Meanwhile PSU banks are attractively poised with favourable risk reward proposition

* Going forward, some volatility near life highs may not be ruled out . However, dips are expected to attract buying and eventually lead index towards 54800 as it is 138 . 2 % retracement of the recent correction (53357 -49727 ) . Meanwhile, given the strong momentum, we have revised short term support levels to 53400

* PSU banks are oversold and expected to attract buying demand near their long term mean . Apart from technical oversold conditions, potential of lower interest rates is expected to act as tailwind for PSU banks

* Price structure : Current up leg in Bank Nifty is of higher magnitude (50369 -54197 ) as compared to previous up leg (49654 -51750 ) indicating improving price structure and corroborates bullish view

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