IGI Logo

Nifty :24131

Technical Outlook

Week that was…

Equity benchmark extended gains over second consecutive week fueled by state election outcome that coupled with firm global cues. Nifty gained 1% to settle the week at 24131. Broader market remained outlier as Midcap, Smallcap gained 2.5% and 5%, respectively. Sectorally, Oil & Gas, PSU, Metal Outshone while Auto, IT remained subdued

Technical Outlook:

* The weekly price action resulted into small bear candle carrying higher high-low. The formation of lower shadow, indicates buying demand at elevated support base.

* Going ahead, we expect Nifty to form a higher base while holding the key support zone of 23700-23500 which would set the stage for challenging immediate hurdle of 24500 in coming weeks. Hence, dips should be utilized to accumulate quality stocks in a staggered manner. Our constructive view is based on following observations:

* a) Six weeks corrective phase in Bank Nifty got retraced back in just 2 weeks. Faster pace of retracement signifies structural improvement. Within the segment, PSU banks outperformed by gaining ~5%

* b) Past three decades historical data exhibit that December seasonality favour bulls with 73% success rate wherein average returns have been to the tune of 3%

* c) Significant improvement in market breadth data bodes well for extension of ongoing pullback as currently 36% stocks of Nifty 500 universe are trading above 50 days SMA compared to mid-Nov reading of 12%

* d) After facing stiff resistance from 108 levels US Dollar Index drifted below 106. Further decline would result into risk on sentiment in equities tracking its inverse correlation

* Sectorally, we remain positive on BFSI, IT, Pharma, Capital Goods while Oil & Gas, Metal offer bargain buy opportunity

* Structurally, since covid lows, average intermediate bull market corrections have been to the tune of 10% in Nifty and 9% in Bank Nifty. With 11% correction in Nifty and 8% correction Bank Nifty is already in place, we expect index to maintain the same rhythm and stage a pullback in coming weeks while holding key support zone of 23700- 23500 zone as it is confluence of:

* a) 61.8% retracement of current rally (23263-24350) at 23675

* b) Long-term rising trend line that has been held over past 2 years

* c) 200 days EMA is placed at 23572

Nifty Bank : 52055

Week Outlook

Day that was :

The Bank continued with its northbound journey over second week in a row . Bank Nifty gained 1 . 8 % to settle the week at 52055 . However, PSU Banking index relatively outperformed the benchmark by gaining 4 . 7 %

Technical Outlook

* The index started the week with a positive gap and subsequently traded in a narrow range . The weekly price action formed a doji like candle carrying higher high -low, indicating continuation of uptrend amid elevated volatility

* The index has witnessed a faster retracement wherein it retraced six week’s corrective phase in just two weeks . The faster pace of retracement highlights structural improvement that makes us believe, index would form a higher base in the range of 51500 -52000 zone and gradually head towards 53500 in coming weeks as it is 80 % retracement of past 2 months decline (54467 -49787 ) . The upward inching ratio chart of Bank Nifty/ Nifty suggest continuation of relative outperformance going forward . Meanwhile, key support is placed at 50400 as it is 80 % retracement of current up move (49787 -52760 )

* 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 has been forming a higher base formation above 100 days EMA . Going ahead, we expect PSU Bank index to resolve higher and surpass September 2024 high of 7050

Please refer disclaimer at https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

SEBI Registration number INZ000183631