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Nifty : 23072

Technical Outlook

Day that was…

Equity benchmark extended losses for the straight fifth session, tracking subdued global cues amid new tariffs announced by the Trump government . Nifty was down 1 . 3 % to settle at 23 ,072 . The market breadth reached bearish extreme reading, with an A/D ratio of 1 : 8 , as the broader market relatively underperformed —both Smallcap100 and Midcap100 indices were down by ~ 3 % . Sectorally, all sectors ended in red, with Realty, Health Care, and Auto being the laggards .

Technical Outlook:

* The Nifty started the day on a flat note and accelerated the downward move as it broke previous week’s low of 23222 . Eventually, it declined near 22987 which is in the vicinity of 80 % retracement level of the previous upmove (22 ,786 -23 ,807 ) . As a result, the daily price action formed a sizeable bear candle, indicating a continuation of the corrective phase .

* The index after past two weeks of up move undergone corrective phase from past five sessions where it was not able to cross previous session’s high . Therefore, to pause the correction close above previous sessions high would be required, else extension of corrective bias where strong support of 22800 is placed, as it aligns with the 38 . 2 % retracement of the up move from (16828 -26277 ) and coincides with the January’s low of 22 ,786 . In the process, immediate hurdle is placed at 23800 which is previous week’s high and only a decisive close and sustenance above 23800 would pave the way for further up move, till then consolidation will likely to pan out in the broader range of 23800 -22800 . Meanwhile, bouts of volatility cannot be ruled out amid anxiety around US Tariff related developments, inflation prints on both the domestic and US fronts . Meanwhile, Prime Minister Modi’s visit to the US would also be a key monitorable . 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 price - wise 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 108 levels . Meanwhile, Brent crude extended losses for the third consecutive week and is hovering around $76 . A falling US Dollar Index and Brent crude prices augur well for risk -on sentiment in emerging markets .

* On the broader market front, Nifty Midcap and Small Cap both underperformed the benchmark, losing approximately 3 % each . However, empirically over past two - decade Midcap corrections have been limited to 20 % , with the Current 17 % correction in place, downside appears limited . Additionally, the breadth indicator ( % of stocks above 50 days SMA of Nifty 500 Universe) has reached at bearish extreme level of 9 . Since covid lows, such an extreme reading leads to short term reversal .

Nifty Bank : 49403

Technical Outlook

Day that was :

The Bank Nifty continued the bearish bias for the third straight session and closed the day on a negative note at 49403 , down by 1 .16 % . The Nifty PSU Banking index underperformed the benchmark, closing the day at 6001 , down by 2 .15 %

Technical Outlook :

* The Bank Nifty opened gap -down and gradually declined throughout the day, where intraday pullbacks were short -lived which led index to close with a bearish bias . In the process, the daily price action created a sizeable bear candle indicating continuation of ongoing corrective move .

* Going ahead, the index needs to close above the previous sessions high to pause the ongoing correction and resume its upward momentum where the initial resistance is placed at the mark of 50640 which is the recent swing high, while sustaining above it would result in a higher high low formation and led the index towards the mark of 51600 which is 61 . 8 % retracement of the previous fall (53888 -47844 ) . On the other hand, the key support is placed at 48900 being 61 . 8 % retracement of recent up -move (47844 -50641 ) . Additionally, The Bank Nifty index has not breached the previous weeks low contrary to the Nifty, thus, showing resilience at higher levels . The Inflation on domestic and US front will be the key data points to monitor .

* The Bank Nifty has witnessed a breakout from the three -week base formation around the lower band of 2 years rising channel and closed above the budget day high, 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 mark of 48900 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 48900 will act as a support .

* Mirroring the benchmark move, the Nifty PVT Bank index breached the four days sideways consolidation on the downside and created a sizeable bear candle, indicating a continuation of ongoing corrective move . The PVT Banking stocks have corrected relatively less in Banking space indicating comparative resilience . Moving ahead, the breach above previous swing high will indicate a pause in the ongoing corrective move post which, we expect the index to move towards the mark of 25250 which is the upper end of the falling channel formed adjoining the moves of Sep -24 & Dec -24

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