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Nifty :23533

Technical Outlook

Day that was…

Nifty extended losses and settled 2.5% lower for the week at 23532 as FII's selling continued amid rise in US Dollar index and bond yields that weighed on market sentiment. Broader market relatively underperformed as Nifty midcap, small cap closed 4% lower. Sectorally, Barring IT all major indices ended in red weighed down by metal, PSU Banks

Technical Outlook:

* The index started the week on a subdued note and gradually inched southward as the week progressed. As a result, The, weekly price action formed a bear candle carrying lower high-low, indicating extended correction amid elevated volatility

* In the upcoming truncated week, we believe, amidst ongoing volatility supportive efforts can be seen around key support zone of 23200-22900 as it is 52 weeks EMA coincided with election outcome day high. Meanwhile, for a meaningful pullback to materialise, index need to decisively close above previous sessions high which has not been the case in recent past

* On the structural front, all major indices including Nifty, Bank Nifty, Midcap, Small Cap have approached their 200 days EMA amid oversold conditions. Over past two years, on multiple occasions, mean reversion towards 200 days EMA resulted into technical pullback

*  The breadth indicator (% of stocks above 50 days SMA of Nifty 500 Universe) has approached bearish extreme level of 12 during the week. Since covid lows, such an extreme reading leads to short term reversal

* On the global marco front, pullbacks in Brent prices were short lived amid slowdown in demand and possible rise in production. A decisive close below 69 would result into extended correction towards 65 mark going ahead

* Sectorally, IT, pharma, BSFI expected to relatively perform better. However, Infrastructure space appears to be oversold technically and poised for a bounce back

* Structurally, since covid lows, average intermediate bull market corrections have been to the tune of 10% in Nifty and 9% in Bank Nifty. With 10% correction in Nifty and 8% correction Bank Nifty is already in place with positive divergence in Bank Nifty, we believe price wise correction remains limited however, index can undergo time wise correction with key support in the range of 23200-22900 as it is confluence of: A) 61.8% retracement of Jun-Sept rally (21281- 26277), placed at 23200 B) Long term rising trend line that has been held over past 2 years C) 52 weeks EMA is placed at 23146

Nifty Bank : 50179

Technical Outlook

Day that was:

Index extended losses over second consecutive week tracking sell -off in index heavy weights . Bank Nifty settled the week at 50180 , down 2 . 7 % for the day . The PSU Banking index relatively underperformed the benchmark by losing 5 %

Technical Outlook :

* The index started the week on a positive note . However, failed to capitalize initial up move and resulted into further sell -off . Weekly price action resulted into bear candle forming lower high -low, indicating corrective bias . The selling pressure accelerated on the breach of past 2 weeks low of 51000 .

* The index has closed at the lower band of past 6 weeks consolidation around 50200 that coincided with 200 days EMA and key long -term rising trend line (that has been held over past 2 years) . Meanwhile, daily RSI oscillator is witnessing positive divergence, highlighting impending pullback . However, for a meaningful pullback to materialize, index need to decisively close above previous sessions high . Failure to hold 200 days EMA (placed at 49900 ) would lead to extended correction towards 49300 being 52 weeks EMA

*  Structurally, since July -23 , on 4 occasions Bank Nifty has maintained the rhythm of not correcting > 9 % and subsequently undergone base formation for next 3 - 4 weeks before unfolding next leg of up move . In current scenario, with ~ 8 % correction already in place, we expect Bank Nifty to maintain the same rhythm and stage bounce in coming sessions

* The PSU bank extended losses and closed below previous week’s low, initiating breather after recent outperformance . We expect, PSU Bank index to hold October low of 6188 and gradually form a higher base

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