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Nifty :23350

Technical Outlook

Day that was…

Indian equity benchmarks closed the week on a strong note, supported by positive global cues, as the Nifty settled at 23,350, up 4.26%. The Nifty Midcap and Small cap indices gained 7.74% and 8.64%, respectively, reflecting strong participation across segments. Sectorally, all indices ended in green, with Realty, Energy, and Pharma emerging as the top performers

Technical Outlook

* The Nifty opened the week on a flat note but maintained a higher high-low structure. As a result, the weekly price action formed a strong bullish candle, marking a breakout above the last four weeks’ high, an indication of a robust trend reversal.

* Key point to highlight is that, Nifty recorded its strongest weekly close since February 2021, reinforcing our confidence that the index has paved the way for 23,800, the previous swing high. The index also closed above the 52-week EMA (23,233) for the first time in five weeks, breaking out of a six-month falling trendline on the weekly chart. This confirms the conclusion of the corrective phase and highlights the index’s resilience. Meanwhile, Bank Nifty recouped past five weeks decline in just a single week. Faster pace of retracement signifies structural turnaround that would provide impetus for next leg of up move as Bank Nifty carries 36% weightage in Nifty. However, given the sharp ~1,000-point rally in Nifty (over past five sessions), some volatility is expected; however, any pullback should be viewed as a buying opportunity rather than a negative reversal. The previous five-month “sell-on-rally” approach has now shifted to a “buy-on-dips” strategy as sentiment has improved. As long as 22,600 remains intact, the focus should be on accumulating quality stocks with a mediumterm perspective.

* Structurally, after a steep 16% correction over the last five months, market sentiment and momentum indicators have rebounded from bearish extremes. The percentage of stocks trading above their 50-day SMA surged from 7% to 52% in Friday’s session, highlighting the strength of the recovery. Historically, corrections below the 52-week EMA have averaged 6-7%. In the current scenario, the Nifty followed a similar pattern, staging a recovery after a 6% drawdown and reclaiming the 52-week EMA on Friday. Data from the past three decades suggests that buying near the 52-week EMA offers a favorable risk-reward ratio, with a median return of 23% over the next 12 months. Given this historical precedent, we believe the index is approaching price-wise maturity with limited downside and is poised for the next leg of the uptrend. Our constructive bias is validated by following observations:

* a. The ratio chart of Nifty/Dow Jones has recorded a breakout from a six-month falling channel, indicating the domestic market could relatively outperform US equities going forward.

* b. The cool off in US 10-year Yields, Dollar Index and Brent crude augurs well for emerging markets by easing inflation and boosting sentiment.

* On the broader market front, the Midcap and Small cap indices closed above their 100-week EMA, breaking out from a three-month falling trendline, an encouraging sign of inherent strength. Both the indices have seen a rebound after approaching maturity of price and time wise correction. Historically, maximum average correction in Midcap and small cap index has been to the tune of 27% and 29% while time wise such correction lasted 5 months. Subsequently, both indices have seen 28% returns in next six months. Hence, the focus should be on accumulating quality stocks (backed by strong earnings) in a staggered manner.

* The critical support for the Nifty stands at 22,600, which represents a 50% retracement of the current upmove (21,965–23,216). This level is expected to act as a strong cushion, ensuring that dips remain buying opportunities rather than trend

Nifty Bank : 50593

Technical Outlook

Day that was :

The Bank Nifty witnessed a stupendous rally throughout the week where it settled at 50593 , up by 5 .27 % . Meanwhile, both the Nifty PVT Bank as well as the Nifty PSU bank index contributed to this bullish momentum, rising 5 .33 % and 6 .00 % respectively .

Technical Outlook :

* The Bank Nifty opened the week on a positive note and continued the bullish momentum throughout the week, occasioning in a positive close for all five days . The weekly price action resulted in a strong bullish candle which resulted in a breakout above the last five weeks’ high, an indication of a robust trend reversal .

* Key point to highlight is that, the Bank Nifty witnessed a faster pace of retracement and swiftly reclaimed losses from the previous five weeks in just one week, posting its strongest weekly close since Dec -23 , thus reinforcing our confidence of the structural up -move . During the week, the index managed to close above the 200 -day EMA, which was not the case since Dec -24 and formed a higher high after 3 months on weekly chart . Additionally, the index closed above the psychological mark of 50000 , reinforcing bullish sentiment with further upside potential towards 51500 being 61 . 8 % retracement mark of the previous fall (53888 -47703 ) . Meanwhile the near -term support is placed at 49500 which is 50 -day EMA coinciding with 38 . 2 % Fibonacci retracement mark of the recent up -move (47703 -50672 ) . Going ahead, any pullback hereon should be capitalized as a buying opportunity with the focus on accumulating quality stocks from a medium -term perspective .

* Structurally, the Bank Nifty bounced from the vicinity of 100 -week EMA after forming a triple bottom pattern . Additionally, the faster pace of retracement resulted in the momentum indicators to rebound from bearish extremes . The weekly stochastic oscillator has observed a bullish crossover suggesting acceleration to the ongoing up -move .

* In tandem with the benchmark index, the Nifty PSU Bank index witnessed a falling trendline breakout after bouncing from the lower end of falling channel . The index closed above its previous weeks high after 14 consecutive weeks resulting in a higher high low pattern . Additionally, the weekly RSI observed a bullish crossover suggesting acceleration to the ongoing up -move, Going ahead, we expect the index continue the upward momentum and move towards 6600 being 61 . 8 % retracement of the previous fall (7248 -5530 ) .

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