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Nifty :23518

Technical Outlook

Day that was…

Equity benchmark snapped seven sessions losing streak tracking firm global cues. Nifty gained 65 points to settle the volatile session at 23518. Market breadth tuned in favour of advances with A/D ratio of 1.5:1. Sectorally, barring Metal, PSU Banks, Oil & Gas all other sectors gained lead by auto, pharma, realty

Technical Outlook:

* The supportive efforts from 200 days ema helped index to resolve higher. However, profit booking in the second half of the session amid geopolitical worries trimmed initial gains and eventually settled on a flat note. The, daily price action formed a small bear candle with long upper shadow, indicating volatility at higher levels. In the process, broader market relatively outperformed as Nifty midcap, smallcap index gained ~1%, each

* The lack of follow through strength at higher levels signifies inherent weakness. Hence, for a meaningful pullback to materialise, index need to decisively close above previous sessions high which has not been the case in recent past. On the downside we believe supportive efforts can be seen around 23200-22900 zone as it is 52 weeks EMA coincided with election outcome day high.

* 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 23146

Nifty Bank : 50626

Technical Outlook

Day that was :

Index extended gains over third session amid elevated volatility . Bank Nifty inched up 0 . 5 % to settle Tuesday’s session on a positive note at 50626 . The PSU Banking index relatively underperformed as it dropped 0 . 6 % for the day

Technical Outlook :

* The index pared initial gains and settled the session on a negative note amid geopolitical worries . The daily price action resulted into small bull candle with long upper shadow, indicating pause in downward momentum .

* Going ahead, holding last weeks low of 49900 would keep pullback options open . Failure to hold 200 days EMA (placed at 49900 ) 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 failed to capitalize Monday’s up move and settled on a subdued note . We expect, PSU Bank index to hold October low of 6188 and gradually form a higher base

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