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Nifty : 23092

Technical Outlook

Week that was…

Equity benchmarks edged lower over third week in a row tracking elevated global volatility and settled the volatile week at 23092, down 0.5%. In the process, broader market relatively underperformed as Nifty Midcap and smallcap lost 2.5% and 4%, each. Sectorally, IT, FMCG outshone while realty, energy extended losses.

Technical Outlook:

* The index started the week on a positive note. However, lack of follow through strength resulted into extended consolidation in a narrow range. Consequently, the weekly price action resulted into small bear candle, indicating narrow trading range amid corrective bias

* In todays session, Nifty is likely to witness gap down opening tracking weak global cues. We believe, bias would remain corrective as long as Nifty forms a lower high-low formation. Hence, a decisive close above 23400 would be the key monitorable which would open the door for pre-budget rally and eventually head towards 24200 in February. However, move towards 24200 would not be in a linear manner as bouts of volatility cannot be ruled out owing to US Fed meet outcome, monthly expiry week coupled with Q3FY25 earnings of many heavy weight companies which would have bearing on the market. In the process, 22500 would continue to act as key support.

* Key point to highlight is that, since 2002, Nifty has not recorded negative close for more than 3 consecutive months wherein average correction has been to the tune of 14% (barring 2008 & 2020 scenario). Buying in such scenario has been fruitful as Nifty has garnered 15% returns in subsequent three months. In current scenario, with 13% correction already in place, we expect index to maintain the same rhythm as downside remains limited with key support at 22500 levels

* Meanwhile, the global market sentiments have been boosted amidst Trump government optimism. As a result, most of the global equity markets reclaimed their Life Time Highs. We expect, catch up activity should be seen post recent underperformance against global peers

* On the global macro front, the dollar index has been replicating the move seen during 2016-17 (Trump phase I), where it topped out in Mid-January of 2017 and subsequently declined over next couple of quarters, resulting into risk on sentiment. Further, the formation of evening star candlestick pattern on weekly chart, signifies corrective bias wherein upside is capped at 110 levels

* On the downside, critical support is placed at 22,500 which aligns with the implied target of the recent consolidation breakdown (24,200–23,300) and coincides with the 50% retracement of the October 2023 to September 2024 rally (18,838–26,277).

* Sectorally, we remain constructive on BFSI, IT, Capital Goods & Infra while Metals, Consumption and PSU offers favourable risk reward set up

Nifty Bank : 48368

Technical Outlook

Week that was :

The Bank Nifty witnessed rangebound action for the second consecutive week, where it settled the week on a flat to negative note at 48368 , down by 0 .36 % . Meanwhile, Nifty PSU Bank index underperformed the benchmarks closing on a negative note at 6153 , down by 2 .24 % for the week .

Technical Outlook :

* The Bank Nifty opened the week with a bullish bias where it breached the preceding weeks candle on the upside . However, the lack of follow through buying and volatility due to heavyweight banking stocks Q 3FY25 result led to a flattish close to the week .

* The key point to highlight is that, the weekly stochastic indicator has entered into extreme oversold territory, currently below 8 (the first time since 2013 ) . Historically, such conditions have led to a meaningful pullback in next one month .

* Structurally, the index is consolidating in the vicinity of lower band of rising channel, in a broader range of 47898 -49798 since past 12 trading sessions amid oversold conditions . The historical data depicts that the Bank Nifty has a tendency to rebound from the vicinity of 100 -week EMA on multiple occasions . At present, the index is undergoing a healthy consolidation near the same, and we expect it to maintain the same rhythm, which can lead to a bounce in coming sessions towards the upper end of the mentioned range .

* Moreover, the breach on the upside will result into an extended pullback toward 51600 mark which is 61 . 8 % retracement of the recent fall (53888 -47898 ) .

* In tandem with the benchmark index, the Nifty PSU Bank encountered resistance of the falling trendline (drawn adjoining Dec -24 highs) and retraced it previous weeks gain of 209 points . However, on the higher timeframe the broader structure remains intact and a breakout above the descending trendline placed at 6500 will fuel the next leg of up move, while on the downside the 6000 mark, which is 80 % retracement of the recent up -move (5866 -6480 ) will provide immediate support .

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