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Nifty :23350

Technical Outlook

Day that was…

Equity benchmark edged lower tracking muted global cues amid geopolitical tensions. Nifty settled weekly expiry session at 23350, up 0.7%. Market breadth turned negative with A/D ratio of 1:2.4. Sectorally, IT, realty remained at forefront while Oil & Gas, PSU Banks, metal extended losses

Technical Outlook:

* The Nifty traded in 100 points range after initial decline. Consequently, daily price action resulted into bear candle, carrying lower high-low, indicating continuation of downward momentum. As a result, index has approached the long term rising trend line drawn adjoining subsequent lows of Mar-Oct 2023, placed at 23260

* The formation of lower high-low clearly indicates lack of follow through strength that resulted into prolongation of corrective bias. Thus, formation of higher high-low along with a close above previous session’s high would be the pre-requisite to pause the downward momentum. On the downside, we believe supportive efforts can emerge around 23200-22900 zone as it is 52 weeks EMA coincided with election outcome day high amid oversold conditions as daily and weekly stochastic oscillator is placed at 14 and 9 levels, respectively

* On the structural front, all major indices including Nifty, Bank Nifty, Midcap, Small Cap have been hovering around their 200 days EMA amid oversold conditions. Over past two years, on multiple occasions, mean reversion towards 200 days EMA resulted into technical pullback

* The breadth indicator (% of stocks above 50 days SMA of Nifty 500 Universe) has bounced from bearish extreme level of 12 during last week. Since covid lows, such an extreme reading leads to short term reversal

* Structurally, since covid lows, average intermediate bull market corrections have been to the tune of 10% in Nifty and 9% in Bank Nifty. With 10% correction in Nifty and 8% correction Bank Nifty is already in place with positive divergence in Bank Nifty. We believe price wise correction remains limited however, index can undergo time wise correction with key support in the range of 23200-22900 as it is confluence of: A) 61.8% retracement of Jun-Sept rally (21281-26277), placed at 23200 B) Long term rising trend line that has been held over past 2 years C) 52 weeks EMA is placed at 23153

Nifty Bank : 50372

Technical Outlook

Day that was :

Index extended breather over fourth session in a row and settled Thursday’s session on a subdued note at 50373 . The PSU Banking index relatively underperformed as it dropped 2 . 5 % for the day

Technical Outlook

* The index trimmed some of initial losses and settled the session on a flat to negative note . The daily price action resulted into hammer like candle above 200 days EMA, Indicating impending pullback .

* Going ahead, holding 200 days EMA (placed at 49900 ) would keep pullback options open . However, failure to do so would lead to extended correction towards 49300 being 52 weeks EMA

* The index has been witnessing elevated volatility above 200 days EMA that coincided with the lower band of past 6 weeks consolidation around 50200 coupled with key long -term rising trend line (that has been held over past 2 years) . Meanwhile, daily RSI oscillator is witnessing positive divergence, highlighting impending pullback .

* Structurally, since July -23 , on 4 occasions Bank Nifty has maintained the rhythm of not correcting > 9 % and subsequently undergone base formation for next 3 - 4 weeks before unfolding next leg of up move . In current scenario, with ~ 8 % correction already in place, we expect Bank Nifty to maintain the same rhythm and stage bounce in coming sessions

* The PSU bank index extended losses and approached October low of 6190 . The breach of last month’s low on a closing basis would result into extended correction going ahead . Failure to do so, would keep pullback options open

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