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Nifty :22907

Technical Outlook

Day that was…

Indian equity benchmarks closed on a positive note despite muted global cues and settled at 22,907, up 73 points. The market breadth was in favor of advance, with an A/D ratio of 4:1, as the broader market outperformed, where both the Nifty midcap index and the Nifty small cap index closed on a positive note, up by 2.63% and 2.43% respectively. Sectorwise, barring IT, and FMCG all sectors closed in green where, Realty, PSU Bank and Consumer Durables outshone.

Technical Outlook

* The Nifty opened gap up (22834-22874) and made higher high-low with in a small range of 132 points, where intraday dips were bought into. As a result, the daily price action formed a small bull candle indicating continuation of the positive momentum. Today’s up move was supported by significantly above-average volumes, as daily trading volumes surged from the usual sub-80k crores to over 1 lac crores, underscoring the strength of the trend.

* Nifty is expected to open gap up on dovish comments from Fed chair. Key point to highlight is that, despite global volatility, the index managed to sustain above Tuesday’s breakout, helping it stay above 20-day EMA reaffirming its resilience. Notably, the market has been respecting key Fibonacci retracement levels. The decline from the Sep 24 high to the Nov 24 low was retraced by 50%, followed by a similar 50% retracement of the Dec 24 high to the Jan 25 low. Currently, a comparable setup is unfolding, as the pullback from the Feb 25 high to Mar 25 low has now retraced slightly over 50%. The continuation of revival in momentum reinforces our confidence that the index has now paved the way to challenge the psychological mark of 23000 and gradually head towards 23400-23500 zone, which coincides with the 200-day. In this process, volatility is likely to persist, influenced by tariff-related developments. However, any corrective move from current levels can be used as a buying opportunity, as long as 22300 is protected. Holding this support would result in a higher low formation, reinforcing the ongoing recovery and setting the stage for a renewed uptrend toward 23500. Meanwhile, focus should be on accumulating quality stocks from a medium-term perspective.

* Structurally, after the fall of 16% in last five months the sentiment and momentum indicator bounced from the bearish extreme levels. Meanwhile, past three decades data suggest that, the average drawdown below the 52-week EMA has been 6-7%, and in tandem with that even in current scenario index staged a recovery from same reading of 6%. Considering aforementioned evidences, we believe that the index is approaching pricewise maturity with limited downside and now it would undergo time wise correction wherein it would consolidate and form a base formation that would set the stage for next leg of up move. 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 outperformed the broader market and closed above its 20-day EMA for the first time after two months, and continuation after the break out from falling trendline, indicating inherent strength, suggesting extended pullback. Hence, the focus should be on accumulating quality stocks (backed by strong earnings) in a staggered manner.

* After basing for three weeks, Tuesday’s breakout from the consolidation zone and formation of a higher high-low signifies positive bias, which made us revise the support levels around the base of the consolidation zone of 22300.

Nifty Bank : 49702

Technical Outlook

Day that was :

The Bank Nifty witnessed a positive closing for the fifth straight session and settled the day at 49702 , up by 0 .79 % . The Nifty PSU Banking index outperformed the benchmark and settled at 6019 , up by 1 .98 % .

Technical Outlook :

* The Bank Nifty continued the positive momentum from the previous sessions, maintaining its higher high -low formation . The price action resulted in a strong bull candle, indicating strength to the ongoing upward momentum .

* Key point to highlight is that, the index witnessed a follow through buying after breaking out of the falling trendline and witnessed a positive close above 50 DEMA, which was not the case since Dec -24 . This makes us believe that the bullish momentum is likely to continue and we expect the index to surge further towards 50600 being the previous swing high . Meanwhile, near -term support is placed at 48700 being 50 % retracement of the recent up - move (47702 -49807 ) .

* Structurally, with 12 % correction from the top the index reached in the vicinity of 100 -week EMA, where it tested the mark of 47800 for four times is past two months and managed to sustain above it on a closing basis, thereby displaying the importance of the same . Given the recent falling trendline breakout and sustenance above 50 –day EMA, the outlook remains positive for further upside .

* Mirroring the benchmark index, the Nifty PSU Bank index continued the bullish momentum from the prior trading session and closed above the previous swing high of 5976 , thereby witnessing a higher high -low formation . Meanwhile, the daily RSI witnessed a bullish range shift indicating acceleration to the ongoing pullback . Going ahead, we expect the index to move towards 6400 being 50 % retracement of the previous fall . On the downside the recent swing low of 5730 will provide immediate support .

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