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Nifty :23176

Technical Outlook

Day that was…

Equity benchmarks, after four consecutive sessions of decline, took a breather in Tuesday’s session. The Nifty gained 90 points to settle at 23,176. The broader market outperformed the benchmark by gaining ~2%, resulting in an improvement in A/D ratio of 3:1. Sectorally, barring IT and FMCG, all sectors ended in the green, with PSU Bank, Metal, and Auto contributing the most

Technical Outlook:

* The Index witnessed a gap-up opening (23086-23166) and gradually moved upward to 23,264 levels, where it encountered resistance at the November low. As a result, previous support acted as resistance as per the rule of polarity. After a failed attempt at a pullback, the Nifty traded within a narrow range of 54 points for the rest of the session. In the process, it formed an inside bar pattern, indicating a pause in the down move.

* Decisive close above 23300 for next couple of days would pave a way till 23700 which is 200-day EMA. A key point to highlight is that the daily and weekly stochastic oscillators remain in oversold territory (placed at 11 and 17, respectively).

* The Nifty breached the key support of the 52-week EMA for the first time since March 2023, suggesting the next critical support at 22,500 in the near term. This level 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). Meanwhile, immediate resistance is now placed at the 200-day EMA, positioned at 23,700. Sustaining above this level would pave the way for a further pullback.

* The broader market outperformed the benchmark index, with the Nifty Midcap and Small Cap indices gaining 2% to close the session higher. Both indices also formed inside bar patterns, suggesting a pause in the downtrend and continuation of consolidation. However, we believe the index is undergoing a secondary correction within a bull market, a phenomenon observed on three occasions since the Covid lows. Historically, such corrections have averaged a 17% decline in price terms and lasted 4-5 months. In the current scenario, with a 15% correction already in place, we believe the broader market is nearing price-wise and time-wise maturity, creating the potential for base formation after a further 2-3% correction.

* Amid an eventful January, we expect volatility to remain elevated, driven by the Q3FY25 earnings season, as several heavyweight companies (carrying >20% weightage in the Nifty) announce their results. Additionally, anxiety around potential new policy measures from the Trump administration and Budget expectations will continue to weigh on market sentiment.

* On the global macro front, the Dollar Index is approaching its key hurdle at 112 amid overbought conditions. However, we believe this uptrend in the Dollar Index is likely to ease once concerns around Trump’s policies subside, providing some support to emerging markets

Nifty Bank : 48729

Technical Outlook

Day that was :

The Bank Nifty took a breather and snapped seven days fall, ending the day on a positive note at 48729 , up by 1 .43 % . Meanwhile, Nifty PSU Bank index relatively outperformed the benchmark by closing positive by 4 .20 % , also being the major gainer among all the indices .

Technical Outlook :

* The Bank Nifty opened gap -up, and witnessed gradual buying demand throughout the day and ended the day with sizeable bull candle, indicating a pause in downward momentum . The index breached the previous swing high and closed above it after seven consecutive sessions, amid extremely oversold conditions .

* Going ahead, for a meaningful pullback to materialize, the index needs to give a decisive close above 52 -week EMA, coinciding with the psychological mark of 50000 for two - three sessions which would confirm the pause in downward momentum, else extended correction would be observed where the next support is placed at 46800 which is 61 . 8 % retracement of Oct -23 to Sept -24 rally (42105 -54467 ) .

* Structurally, since 2016 on multiple occasions supportive effort emerged from the vicinity of 100 -week EMA (barring covid fall) . In current scenario, the index is approaching the same amid oversold conditions as in past four weeks 10 % decline has hauled weekly stochastic oscillator in oversold territory (placed at 11), indicating impending pullback .

* In tandem with the benchmark index, the PSU Bank index encountered support at 100 -week EMA coinciding with the long -term trendline joining the lows of Oct -20 and June -22 and witnessed a pullback where it breached the previous day high after seven consecutive trading sessions . Going ahead, 50 % retracement at 5800 of previous up -move(3528 - 8053 ) will act as an immediate support mark, while sustainability above 6200 mark which is Nov -24 low, would open the gate for a meaningful pullback .

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