The Nifty started the truncated week with a big gap-up opening (22828-23368) - ICICI Direct
Nifty :23328
Technical Outlook
Day that was…
Indian equity benchmarks staged a strong rebound tracking Trump’s announcement of possible exemptions on auto tariff and settled the day on strong note at 23328 up 2%. Market breadth was in favor of advances, with a staggering A/D ratio of 7:1, as the broader market outperformed. Both the Nifty Midcap and Small cap indices closed 3% positive. Sectorally, all sectors closed in green, where Realty, Auto and Metal were outperformers.
Technical Outlook:
* The Nifty started the truncated week with a big gap-up opening (22828-23368). Subsequently index oscillated within a narrow range throughout the day before closing near day’s high. As a result, the daily price action formed pin bar candle, indicating strong demand at lower levels. Key point to highlight is that, India VIX a measure of fear and volatility witnessed a sharp fall of 20% in a single session indicating anxiety around Tariff development is settling down
* The current strong recovery supported by positive divergence on the weekly chart, indicates that bottom is in place. With current structural improvement we believe index has undergone a base formation while absorbing most of negative news and set the stage for next leg of up move towards 24000 in coming weeks. Hence, focus should be on accumulating quality stocks to build a medium-term portfolio onset of Q4 earning season. Meanwhile Nifty in last five session index has moved 7.5%, indicating revival in upward momentum. Due to this action we revise our support levels to 22500 levels which is 50% of the recent rise from (21743-23368).
* Since 2002, within a structural bull market, price wise maximum intermediate corrections have typically been to the tune of 18% (barring 2004 & 2006). Meanwhile, time wise such corrections last for average 8-9 months. In current scenario, we believe index is approaching price and time wise correction as index has already corrected 17% over past seven months. Historically, buying in such scenario has been rewarding, delivering an average return of 23% over the subsequent twelve months.
* Our positive bias is further validated by following observations:
* a) While sailing through the global volatility, Banking index managed to hold March lows and now forming a higher base, highlighting relative outperformance that bodes well for next leg of up move towards 53200
* b) The market breadth has been witnessing positive divergence as Nifty 500 has formed a lower low while % of stocks above 200 days SMA has formed a higher low as currently 25% stocks (Nifty 500 Universe) are above 200 days SMA compared to last month reading of 7%.
* c) The US Dollar index is on the verge of breakdown from two years low of 99.50.
* d) Brent crude oil is hovering around 63 after bouncing from 58 levels.
* e) S&P 500 VIX witnessed sharp decline after recording high of 60, indicating anxiety around tariff uncertainty would settle down soon.
* Mirroring the benchmark move, Nifty midcap and small cap indices have staged a strong rebound after retesting multi-year resistance trend line. Historically, maximum average correction in Midcap and small cap indices have been to the tune of 27% and 29% while time wise such correction lasted for 5 months. Subsequently, both indices have seen 28% returns in next six months.
* We expect volatility to prevail amid ongoing global uncertainty, However, with the strong rebound in prices we revise our support base at 22500 which is 50% retracement of the move from (21743-23368).
Nifty Bank : 52380
Technical Outlook
Day that was :
The Bank Nifty index initiated the truncated week with a stupendous gain’s of 1377 points (highest intraday gains in last 10 months) and settled the day on a positive note at 52380 . Meanwhile, the Nifty PVT Bank index outperformed the benchmark and settled at 26103 , up by 2 .82 % .
Technical Outlook :
* The Bank Nifty witnessed a gap -up opening to the truncated week and traded with a bullish bias throughout the day where intraday pullbacks were bought into, indicating elevated buying demand . The price action resulted in a small bull candle with long lower wick carrying positive gap below it, indicating acceleration of upward momentum .
* Key point to highlight is that, the Bank Nifty witnessed a faster pace of up -move where it regained its 9 days of fall in just 4 days, indicating structural strength . The index is witnessing higher high -low formation where it breached its previous resistance mark of 52000 on closing basis . Additionally, the daily RSI witnessed a falling trendline breakout, signaling revival in upward momentum . Going ahead, all these factors makes us believe that the index is poised for further upside towards 53200 being 80 % retracement of the previous fall (54467 -47702 ) . Meanwhile, the mark of 51100 will provide immediate support on the downside being recent gap area as well as 38 . 2 % retracement of current up -move (48157 -52486 ) .
* Structurally, the Bank Nifty is showing resilience as compared to the benchmark as it witnessed a strongest candle in last month post Jun -24 , and is now witnessing a follow through buying demand in current month, indicating revival in upward momentum .
* Mirroring the benchmark index, the Nifty PVT Bank index continued the bullish momentum from the previous week and witnessed a gap -up opening, where it breached its multi -month resistance mark of 26000 on a closing basis, indicating elevated buying demand . The index observed higher high -low formation along with a bullish crossover on daily MACD, suggesting acceleration of upward momentum . Going ahead, we expect the index to head towards the mark of 26550 , being 80 % retracement of previous fall (27280 -23680 )
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