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Nifty : 22055

Technical Outlook

Week that was…

Indian equity benchmarks declined ~2% last week tracking relentless FII’s outflow and rise in volatility amidst ongoing election phases. The Nifty settled the week at 22055. Broader market relatively underperformed the benchmark as Nifty Midcap lost 2.75% while Small cap lost 5% for the week. Sectorally, metal, PSU, FMCG outshone while oil & gas, IT underwent profit booking

Technical Outlook:

* The index started the week on a subdued note and gradually inched southward as the week progressed since intermediate pullbacks were short lived. As a result, weekly price action formed a sizable bear candle and closed below past two week’s low, indicating extended profit booking. In the process, India VIX has surged >25% to settle the week at 18.6

* Going ahead, we expect index to consolidate in the broader range of 21700-22400 amid elevated volatility. The recent correction has hauled Nifty to the lower band of five months rising channel. Key point to highlight is that, since start of CY24, intermediate corrections have got arrested within 4.5% and subsequently Nifty has recorded new high. In the current scenario, 4.5% correction will mature around 21700 which also coincides with 100 days EMA. Thus, we advise traders to refrain from creating aggressive short position near key support zone amid oversold condition as daily stochastic oscillator is hovering at 12. Thus, ongoing corrective decline should be capitalized to accumulate quality stocks as strong support is placed at 21700

* Key observations during election phases

 A) Over past four elections, Nifty has undergone average 6% correction during polling phases. In current context index has corrected ~4% from life highs and remains in sync with empirical evidence.

B) The India VIX has a tendency to rise ahead of Election and eventually fizzles out post election outcome as anxiety around the event settles down. During MAY 2019, rise in VIX resulted into decline in index that in turn helped Nifty to form a higher base and set the stage for next leg of up movel

* On the upside 22400-22500 would now act as immediate resistance as it is confluence of:

a) 61.8% retracement of current decline 22794-21932

b) current week’s high is placed 22588

Nifty Bank: 47421

Technical Outlook

Day that was :

The Nifty Bank index declined for eighth session in a row after a lack luster trade on Friday . Nifty Bank index closed the session at 47421 , down 67 points

Technical Outlook :

The Bank Nifty started the session on a positive note however lack of follow through buying led index to give up gains and then settled marginally lower . Index formed a high wave candle with lower high -low indicating continuation of corrective bias and in the process declined 5 % over past eight sessions from life highs of 49974 leading daily stochastics to reading of 5 . 5 . Prices have thus approached key support zone of 47000 , holding which a technical bounce back from oversold readings is on the cards over next few sessions wherein 48500 would be immediate hurdle, which is 50 % retracement of recent correction

Following are key observations :

* Since late Jan’24 low of 44633 , index is following a well channeled up move forming higher bottoms in the vicinity of rising 100 -day ema (47050 )

* Further, each of preceding three corrective declines measure 5% in magnitude, which has already been achieved by current decline at Thursday’s low of 47500

* Going by this tendency and pattern, supportive efforts In the vicinity of 47000 -47500 is expected followed by a base formation

Structurally, current decline from life highs is a healthy retracement and therefore does not alter positional bullish stance . We therefore expect that current decline would result into a higher base formation followed by resumption of rally

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