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Nifty : 24273

Technical Outlook

Day that was… 

Indian equity benchmarks closed on a negative note amid an escalation of geopolitical tension. The index settled Thursday’s weekly expiry session at 24273, down 0.58%. Market breadth tilted in the favor of declines with an A/D ratio of 1:2, as broader market relatively underperformed. The Midcap & Small cap indices closed negative ~1.50%. Sectorally, barring IT, all indices closed in the red, with, Realty, Health Care and Auto being the laggards.

Technical Outlook

*  The index traded range-bound during the first half of the session. However, the escalation of geopolitical tension during the second half of the session resulted in a selloff making a lower-low-high formation, as India VIX rose above 21 levels, up 10% for the day. As a result, the daily price action resulted in a bear candle, indicating extended breather after recent rally

*  In today’s session, Nifty is expected to open gap down amid escalated geopolitical worries. We believe, further development on the same would dictate the trend. A key point to highlight is that over the past three decades, there have been three major instances of escalations due to armed conflicts in India (i.e., Kargil War, 26/11, Pulwama attack). On each occasion, the market formed a major bottom, once the initial anxiety surrounding the event subsided. Subsequently, market sentiment improved significantly, often leading to a notable rebound and decent returns in the subsequent three months. In the current scenario, post-retaliatory action, the possibility of a knee-jerk reaction cannot be ruled out. However, such a breather should not be construed as negative; instead, it should be utilized to accumulate quality stocks with strong earnings, as strong support is placed at 23,500–23,200. Further, any de-escalation will result into meaningful pullback in the coming weeks. Our positive view is further validated by the following observations:

*  a) There is an ancient market saying: “Sell in May and go away.” However, historical data suggests that the Nifty has witnessed positive returns in 9 out of the last 12 years (2013–2024), with an average return of 2.1%.

*  b) Elongation of rallies followed by shallow retracement in Bank Nifty highlights a robust price structure.

*  c) The India-UK FTA deal is expected to bolster positive market sentiment.

*  d) Cool off in Brent crude oil prices and weakness in US Dollar index would provide further cushion to domestic market.

*  e) FIIs have maintained their buying streak for sixteen consecutive sessions (the longest in 2 years), accumulating a total of ~49,000 crores. The return of FIIs bodes well for Indian equities.

*  f) Bilateral Trade Agreement between India and US would boost the market sentiment

*  Amid heightened geopolitical worries we revise support base at 23500- 23200 zone as it is confluence of 200 days EMA coincided with 50% retracement of recent rally off April lows of 21743

Nifty Bank: 54365 

Technical Outlook

Day that was… 

The Bank Nifty witnessed yet another volatile session amid escalation of geopolitical tension between India and Pakistan where it settled the day on a negative note at 54365, down by 0.45%. The Nifty PSU Bank index underperformed the benchmark and settled at 6168 , down by 1 .35 % .

Technical Outlook :

*  The Bank Nifty witnessed a gap -up opening and traded on a positive note for the majority of the day . However, the escalation of geopolitical tension during the day resulted in a selloff which wiped out the intraday gains . The daily price action resulted in a sizeable bear candle, indicating prolonged consolidation .

*  In today’s session, Bank Nifty is expected to open gap down amid escalated geopolitical worries . We believe, further development on the same would dictate the trend . Key point to highlight is that, despite the uncertainty the Bank Nifty managed to close above the previous sessions low from where it had observed supportive efforts in Wednesday’s trading session . Additionally, the index is witnessing slower pace of retracement where it has not even retraced 38 . 2 % in last 11 trading sessions of the sharp up -move seen in preceding 9 sessions . The higher base formation has been helping index to cool off the overbought conditions and set the stage to challenge its all - time high of 56100 that would open the door to head towards uncharted territory in coming month . However, prolongation of consolidation amid escalation of geopolitical tension cannot be ruled out .

*  Structurally, the Bank Nifty is witnessing elongation of rallies followed by shallow retracement which signifies robust price structure as the recent up -move is larger (14 % ) as compared to that observed in previous month ( 9 % ) . Additionally, the declines are getting shallower as the recent decline is of 3 . 9 % as compared to 5 . 6 % observed in Mar -25 . Moreover, the Bank Nifty is showing resilience as compared to the benchmark as it witnessed faster pace of retracement where it regained previous 6 months of decline in less than 2 months, indicating structural turnaround . Furthermore, the index broke out of an eight -month falling trendline and surpassed its lifetime high, indicating robust structure .

*  The Nifty PVT Bank index has been consolidating in a broader range of 28050 -26900 from past three weeks . We believe, the ongoing breather is just a temporary pause in the prevailing uptrend and that would act as strong base to gradually head towards the mark of 28050 being the recent swing high . Meanwhile, the immediate support on the downside is placed at 26225 mark, being 50 % retracement mark of the recent up -move (24400 -28050 ) .

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