The Nifty opened gap up (22536-22497) but paired initial gains - ICICI Direct
Nifty :22470
Technical Outlook
Day that was…
Indian equity benchmarks closed negative ahead of US as well as domestic inflation print. The Nifty settled at 22,470, down by 27 points. Sector-wise, Private Bank, Healthcare and Financial Services outperformed, while, IT, Realty and PSU Bank underperformed.
Technical Outlook:
* The Nifty opened gap up (22536-22497) but paired initial gains. However, supportive efforts near the previous sessions low helped the index recover most of the intraday losses. As a result, the daily price action formed a small bear candle with a lower wick, indicating buying interest at lower levels.
* In todays session, index is likely to open on a positive note tracking coo off inflation data coupled with above expected IIP data. A key point to highlight is that despite global volatility, buying demand emerged in the vicinity of 50% retracement (21964-22676), forming a higher base. As a result, index is now witnessing a slower pace of retracement, indicating healthy retracement that indicate the strength in the pullback. Going ahead, the key level to monitor is the 20-DEMA, which acts as an immediate hurdle. If the index sustains above this level, we expect a gradual recovery, opening the door for an extended pullback towards the 23000 mark. However, failure to do so may lead to range-bound consolidation between 22000-22650, with stock-specific action dominating the trend. In the process, volatility is likely to persist, influenced by tariff-related developments and the upcoming FOMC meeting next week. Meanwhile, 22000 will continue to serve as a key psychological support level. Our view of a technical pullback is backed by the following observations:
* a. Over the past three decades, the average drawdown below the 52-week EMA as been 6-7%, followed by >20% returns over the next 12 months. The Nifty is currently ~6% below its 52-week EMA, supporting a potential recovery.
* b. Market breadth recently rebounded from a bearish extreme, as the % of stocks (within Nifty 500 universe) trading above their 50 and 200 days SMA dropped to 8 and 10, respectively. Historically, such bearish readings have paved the way for a durable bottom in the subsequent weeks.
* c. The cool off in US 10 year Yields, Dollar Index and Brent crude augurs well for emerging markets by easing inflation and boosting sentiment.
* d. The monthly stochastic oscillator is in the extreme oversold territory at 13 (lowest since 2002), indicating an impending pullback.
* On the broader market front, the Midcap and Small cap indices, witnessed supportive efforts in the vicinity of 61.80% retracement in Wednesday’s session while protecting previous sessions low, indicating strength. Both the indices witnessed buying demand from the decade-long trendline (Adj Jan 08 high and Oct 21 high) coupled with a positive divergence of the RSI, suggesting that the midcap index could witness extended pullback toward 51500, while the small-cap index may reach 16000 levels. Hence, the focus should be on accumulating quality stocks (backed by strong earnings) in a staggered manner.
* Structurally, after a five-months, 16% decline, the index has now approached the long-term rising trendline amid oversold conditions. The formation of a lower highlow signifies corrective bias, wherein strong support is placed around the 22000.
* a) A rising trendline drawn adjoining subsequent major lows off Jun-22 (15183) is placed at 22000. b) Support is seen near the previous weeks low around the 22000 level. c) The 24-month EMA support is also positioned in the vicinity of 22000.
Nifty Bank : 48056
Technical Outlook
Day that was :
The Bank Nifty settled the Wednesday's session on a positive note ahead of retail inflation data, where it closed the day at 48056 , up by 0 .42 % . The Nifty PVT Banking index outperformed the benchmark and settled at 23990 , up by 0 .73 % .
Technical Outlook
* The Bank Nifty opened the day on a positive note and observed a gradual buying throughout the day . The price action resulted in a small bull candle, indicating supportive efforts at lower levels . The index filled the gap (48124 -48029 ) which was witnessed in Tuesday’s trading session, indicating pause in downward momentum .
* Key point to highlight is that, despite ongoing volatility the index managed to hold above the lower end of the broader consolidation range of 49600 -47800 for the fourth time in last two month on a closing basis, indicating resilience as domestic market is faring well compared to the global markets . Going ahead, sustainability above the same will keep the pullback option open towards the upper end of the broader consolidation range (49600), coinciding with 52 - week EMA . Meanwhile, near -term support on the downside is placed at 46800 which is 61 . 8 % retracement of Oct -23 to Sept -24 rally (42105 -54467 ) . The daily RSI bounced from the multi -support mark of 35 from where it has experienced a pullback on multiple occasions, since over past two months .
* Structurally, with 12 % correction already in place the index is witnessing a base formation near the lower band of 2 years rising channel, which is also in the vicinity of 100 -week EMA .
* In tandem with the benchmark index, the Nifty PSU Bank index is witnessing a slower pace of retracement as over past four sessions it has retraced only 50 % of preceding four days up move (5530 -5977), indicating relative . Going ahead, a close above the recent swing high of 5977 will be the initial sign of the resumption in upward momentum, while a follow through buying will lead the index to resolve higher towards 6200 mark, being 38 . 2 % retracement mark of previous fall (7248 -5530 ) . Meanwhile, immediate support is placed at 5530 , being the recent swing low
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