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Nifty : 19282

Technical Outlook

• The index started the session on a negative note and drifted southward as the day progressed. Consequently, daily price action formed a sizable bear candle carrying lower high low, highlighting relentless selling pressure

• Contrary to our expectation, index breached the key support of 19300 and decisively closed below 50 days EMA for the first time since April 2023. As a result, Nifty formed a lower peak and trough on the weekly chart, highlighting corrective bias. Going ahead, for a meaningful pullback to materialize index need to sustain above 19550 zone as it is current week’s high coincided with 50 days EMA placed at 19590. Failure to do so would lead to continuation of corrective bias wherein strong support is placed at 18800 levels

• Key point to highlight is that, the midcap index has logged a breakdown from 6 weeks consolidation while the small cap index retreated from 15 years resistance trend line drawn adjoining CY07-21 high, indicating profit booking after ~50% rally seen during Mar-Oct 2023 amid overbought conditions (monthly stochastic is hovering at 88).

• In a secular bull market, secondary correction is a common phenomenon wherein small cap index has a tendency of correcting 12-15% from swing highs. Thus, we believe ongoing correction would make broader market healthy wherein strong support is placed at 11400 as it is implicated target of past six weeks consolidation (13148-12297) coincided with 38.2% retracement of Mar-Oct 2023 rally (8682-13148). Thus, focus should be on accumulating quality stocks backed by strong earnings in a staggered manner.

• The formation of lower peak and trough amid global volatility makes us revise the support base downward for the Nifty at 18900-18800 zone as it is confluence of 200 days EMA is placed at 18826 coincided with 38.2% retracement of Mar-Sept rally (16828-20222), at 18925 and previous swing high of 18887 would now act as key support as per change of polarity concept

Nifty Bank: 43151

• The price action formed large bear candle on Monday as prices breached key support of 43600 contrary to our expectations, leading to sharp decline in last one hour . Mondays high of 43800 would now act as immediate key resistance as index forming lower high -low indicates continuation of corrective bias . Formation of higher high - low on daily time frame would be first sign of pause in downward momentum

• Going forward, follow through selling below Mondays low (43029 ) would indicate extended corrective phase towards next major support zone of 42500 -42700 as it is confluence of :

• a) value of rising 52 -week ema which has been held on couple of occasions since CY2020 ,

• b) 50 % retracement of entire rally from March 2023 (38613 -46369),

• c) weekly and daily stochastics have approached oversold trajectory of 11 and 12 respectively indicating oversold nature of prices and would attract buying near key supports

• Structurally, Index is in the process of undergoing a retracement of March to July rally over while pricing in various negatives in the process . We believe current decline would lead to a strong higher base formation around 42500 zone that would act as a starting point for next leg of structural up trend 

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