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Nifty :23031

Technical Outlook

Day that was…

Equity benchmark concluded the volatile session on a flat note, amid the Nifty weekly expiry day, where it closed the session at 23031, or down by 0.06%. However, market breadth remained neutral with an A/D ratio of 1:1 as the broader market witnessed muted session. Sectorally, Pharma, Realty, Financial Services, and Healthcare outperformed, while IT, FMCG, and PSU Banks lagged.

Technical Outlook

* The Nifty opened on a flat note and gradually inched upward. However, the index faced selling pressure from higher levels and erased the initial intraday gains. The daily price action resulted in an inverted hammer candle, indicating initial signs of reversal.

* Historically, formation of inverted hammer candle in the vicinity of lower band (22786), signifies the supportive efforts emerged from the lower level and a close above its high (23235) is required for the upward momentum to continue and confirm the reversal sign. Going ahead, we expect index to enter into a base formation in the vicinity of 52-week EMA, which will eventually pave a path towards the recent swing high of 23800 and also confirm the double bottom formation. Else, failure to do so will result in extended consolidation in the broader range of 22800-23800. Meanwhile, the outcome of Prime Minister Modi’s visit to the US suggests there is no major impact of tariff on Indian market, which boards well with the extended pullback. Hence, focus should be on accumulating quality stocks on dips backed by strong earnings.

* A key point to highlight is that, contrary to benchmark move, Bank Nifty has been showing resilience as it protected previous week low and managed to close above it relatively outperforming the benchmark, while the Bank Nifty/Nifty ratio chart is bouncing from long-term cycle lows, indicating outperformance going ahead.

* Historically, within a structural bull market, secondary corrections are common. With the current 13% correction in place, the index has approached both pricewise and time-wise correction levels. Structurally, since 2002, bull market corrections have averaged 14%, while time-wise, the index has not recorded a negative monthly close for more than 3-4 months. Over the past four months, the index has corrected 13%, absorbing pessimism around both global and domestic uncertainties, leading to bearish extreme readings on sentiment and momentum indicators, suggesting an impending pullback.

* On the global macro front, amidst tariff-related anxiety, the US Dollar Index made a failed attempt to surpass the 110 mark and is currently trading around 107 levels. Meanwhile, Brent crude extended losses for the third consecutive week and is hovering around $75. A falling US Dollar Index and Brent crude prices augur well for risk-on sentiment in emerging markets.

* On the broader market front, the Nifty Midcap and Small Cap, both indices closed on a flat note, indicating a muted session. Empirically, over past two-decade Midcap corrections have been limited to 20%, with the current 19% correction in place, as per historical data, the downside seems to be limited, indicating a near completion of price wise maturity. Additionally, the breadth indicator (% of stocks above 50 days SMA of Nifty 500 Universe) has reached at bearish extreme level of 10. Since covid lows, such an extreme reading leads to short term reversal.

Nifty Bank :49360

Technical Outlook

Day that was :

The Bank Nifty settled the Thursday’s session on a negative note where it closed the day on a negative note at 49360 , down by 0 .24 % . The Nifty PSU Banking index underperformed the benchmark, closing the day at 5998 , down by 0 .90 %

Technical Outlook :

* The Bank Nifty opened on a flat note and witnessed gradual up - move in the first half . However, selling pressure in the second half erased the intraday gains . The daily price action resulted in inverted hammer candle indicating early sign of reversal .

* Going ahead, closing above the inverted hammer candle high (49836) will indicate a pause to the ongoing corrective phase and a follow through buying will be required to resume the upward momentum where the initial resistance is placed at the mark of 50640 which is the recent swing high . On the other hand, the key support is placed at 48734 being the recent swing low coinciding with 61 . 8 % retracement of recent up -move (47844 -50641 ) . Additionally, the Bank Nifty index did not close below the previous weeks low contrary to the Nifty, thus, showing relative outperformance .

* The Bank Nifty has witnessed a breakout from the three -week base formation around the lower band of 2 years rising channel indicating revival in the upward momentum . Thus, making us believe, that the index will continue to resolve higher and move towards the mark of 51600 being 61 . 8 % retracement of previous fall (53888 -47844 ) . In the process, the recent swing low of 48734 shall provide immediate support and any dip witnessed hereon should be capitalized as a buying opportunity in quality stock in a staggered manner .

* Structurally, after 12 % correction the Bank Nifty bounced from the lower end of the long -term rising trendline amid oversold condition, indicating a pause in the downward momentum . The change in market breadth observed in the current week suggests that a short - term bottom is in place and the mark of 48734 will act as a support .

* In tandem with the benchmark index, the Nifty PVT Bank is trading in a falling channel, where it witnessed a bounce from the 50 % retracement of previous up -move (23508 -25025), creating a higher low . Moving ahead we expect the index to move towards the mark of 25600 being 80 % retracement of previous fall (26110 -23508), while the recent swing low of 24229 will be the immediate support

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