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Nifty : 22475

Technical Outlook

Day that was…

Equity benchmark pared intra-week gains and settled the volatile week on a flat to positive note at 22475, up 0.25%. In the process, Nifty Midcap relatively outperformed by gaining 0.6%. Sectorally, PSU, Financials, auto outperformed during the week while, IT, realty took a breather

Technical Outlook:

* The index recorded fresh All time high of 22794 and underwent profit booking in Friday’s session. The weekly price action formed a doji like candle, highlighting profit booking near 22800 amid elevated volatility

* In the coming week, we expect Nifty to undergo higher base formation above 22000, that would set the stage to challenge 22800 and accelerate upward momentum towards our earmarked target of 23400 by June. In the process, bouts of volatility ahead of general election phase can not be ruled out amidst Q4 earning season. Thus, utilising dips to accumulate quality stocks would be the prudent strategy to adopt. Our constructive bias is validated by following observations:

A) Bank Nifty index has given a breakout from 3 ½ month consolidation indicating acceleration of upmove. On relative front, Bank Nifty is expected to outperform Nifty

B) Contrary to adage of sell in May and go away, Indian equities have delivered positive returns in May month during General election years in four out of past five instances since CY1999. Minimum returns were 1.5% while average was 14%

C) Brent prices have given breakdown from five month rising channel indicating that upsides are capped around $92. Further declines towards 75-78 likely in coming month

D) Broader market remains strong led by Mid and small caps strong performance in April as both indices recorded fresh All Time High. Large FII selling also being absorbed by DII flows limiting downsides

* Formation of higher peak and trough makes us confident to retain support base at 22000 is based on confluence of:

 a) 80% retracement of recent up move 21778-22794

 b) Rising trend line drawn adjoining rising trend line drawn adjoining Dec-23 to Jan 24 lows

Nifty Bank: 48923

Technical Outlook

Day that was :

The Nifty Bank extended decline on Friday led by large private banking heavyweights and ahead of US jobs datq . PSU banks relatively outperformed . Index closed at 48923 , down 307 points or 0 .62 %

Technical Outlook :

* Index commenced Fridays session with a gap up action tracking firm global cues, however profit taking in some index heavyweights led to extended profit taking as part of retracement of 7 . 2 % gains in eight session earlier, which led prices to overbought trajectory . Day’s price action formed bear candle with lower low indicating extended profit taking

* We maintain our structural positive stance on index with target of 51000 for the month of May 2024 with index to relatively outperform going ahead . However after recent 7 % rally index is expected to undergo higher base above 48000 levels which will set stage for next up move . Use buy on decline strategy with focus on corporate lenders and NBFC which are expected to do well

* Key observation has been that Bank Nifty/Nifty relative performance ratio chart indicates strong outperformance from Bank Nifty over next 3 - 4 months . Since 2008 , in all six instances, whenever relative ratio line turned up from cycle low, Bank Nifty outperformed by 5 % over three -four months period

*We revise key immediate support for Index at 48000 as it is confluence of :

Last Fridays low

Value of rising 20 -day ema at 48238

50 % retracement of past six session gains at 48026

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