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Nifty : 24781

Technical Outlook

Day that was…

The benchmark started the week on a subdued note despite firm global cues. Nifty settled the Monday’s session at 24781, down 0.3%. The market breadth turned negative with A/D ratio of 1:3 as boarder market relatively underperformed. Sectorally, barring Auto, all other indices ended in red as IT, metal, Oil & Gas underwent profit booking

Technical Outlook:

* The index witnessed range bound activity after initial dip. As a result, daily price action formed a bear candle carrying higher high-low, indicating more of stock specific action amid ongoing consolidation. Key point to highlight is that, Nifty has been respecting key support zone of 24700 amid oversold conditions (as weekly stochastic is placed at 15)

* Going forward, we expect Nifty to prolong the ongoing consolidation in 25200-24700 range wherein stock specific action would prevail amid progression on earning season. Either side breakout would dictate the further course of action. Hence, focus should be on accumulating quality stocks with strong earnings in a staggered manner

* Structurally, current 7% correction has made the market more healthy as most of the Nifty50 constituents have approached their key long term averages which offers favourable risk reward set up. In a bull market, 7-10% correction is a common phenomenon. Buying in such scenario have been fruitful from medium term perspective. Hence, accumulating quality large caps would be the prudent strategy to adopt amid ongoing earning season. Our positive bias is further validated by following observations:

* A.The ratio chart of Bank Nifty / Nifty has resolved higher after forming base at long term cycle lows. As a result, Bank Nifty managed to hold last week’s low amid elevated volatility and eventually gained ~2% during the week, highlighting inherent strength. We believe, the revival in Banking stocks would provide impetus for pullback rally in Nifty as Bank Nifty carries 32% weightage in Nifty

* B.The US market has recorded fresh All Time High. Buoyancy in global market bodes well for domestic market as Nifty has positive correlation with developed markets.

* C.Crude oil price have dropped 5% after facing stiff resistance in 80- 82 zone. In upcoming weeks, we expect it to consolidate in 72-80 range

Nifty Bank : 51962

Technical Outlook

Day that was :

Bank Nifty pared initial gains and settled Monday’s session at 51962 , down 0 .25 % . In the process, PSU Bank index relatively underperformed by losing 1 .25 %

Technical Outlook :

* The index started the session on a positive note . However, failed to capitalize initial up move and eventually pared initial gains . The daily price action formed a strong bear candle carrying higher high -low, indicating consolidation amid stock specific action

* Going ahead, we expect Bank Nifty to endure its relative outperformance gradually head towards 52800 in coming weeks . Key point to highlight is that the ratio chart of Bank Nifty / Nifty has resolved higher after forming base at long term cycle lows . As a result, Bank Nifty managed to hold last week’s low amid elevated volatility, highlighting inherent strength . We believe, the revival in Banking stocks would provide impetus for pullback rally in Nifty as Bank Nifty carries 32 % weightage in Nifty

* Structurally, since July -23 , on 4 occasions Bank Nifty has maintained the rhythm of not correcting > 9 % and subsequently undergone base formation for next 2 - 3 weeks before unfolding next leg of up move . In current scenario, with 8 % correction already in place, we expect Bank Nifty to form a base and eventually outperform the Nifty

* PSU bank index is undergoing base formation in the vicinity of 200 days EMA amid oversold condition . Meanwhile, potential of lower interest rates are expected to act as tailwind for banks

* for banks

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