By Dharmesh Shah
Equity benchmarks concluded last week on a flat to adverse note as index recouped most of intraweek losses and ended the week at 14856, down .5%. Broader market place took a breather as Nifty midcap and tiny cap lost 1% and .3%, respectively. Sectorally, IT, FMCG, realty outshone whilst financials and auto underperformed.
Nifty Technical Outlook
– Despite initial decline, the corrective phase of the market place remains tamed as the Nifty staged a powerful comeback in the second half of the week, in tandem with worldwide peers. The weekly value action formed a tiny bull candle with sizable decrease shadow, highlighting elevated obtaining demand emerged from decrease band of consolidation coincided with 50 days EMA placed about 15600
– Key point to highlight for the duration of ongoing consolidation is that, more than previous 4 consecutive weeks index has managed to hold 15600 mark on various occasions, highlighting a powerful assistance base, which we do not foresee to breach.
– Going ahead, a decisive close above upper band of consolidation 15950 backed by firm worldwide cues and multi sector participation would open the door for next leg of up move towards our revised target of 16300 in the coming month. Thus, dips from hereon ought to be capitalised on to accumulate high quality stocks amid progression of Q1FY22 earning season. Our earmarked target of 16300 is based on following observations:
a) Implied target of current consolidation (15900-15500) breakout is placed at 16300
b) 138.2% extension of mid-June rally (15450-15915), projected from July low of 15633, placed at 16284
We anticipate IT, Metals, Realty and Infra, customer discretionary to comparatively outperform. BFSI is poised with desirable danger/reward proposition
– Our preferred significant cap picks are SBI (State Bank of India), Bajaj Finserv, Wipro, Tata Steel, Maruti Suzuki whilst, in midcaps we like Sonata Software, Intellect Design Arena, Bata India, Bajaj Electricals, KNR Constructions, Indocount Industries, JK Lakshmi Cement, Tata Metaliks
– The Nifty midcap and tiny cap indices took a breather immediately after previous 4 weeks sharp up move. We think, short-term breather from hereon would assistance broader market place to cool off the overbought situation and type a larger base that would pave the way for next leg of up move
– Structurally, the persistent obtaining demand from important assistance zone of 15600-15500 signifies powerful base formation, which we anticipate to hold going forward, as it is confluence of:
a) 80% retracement of June-July rally (15450-15962), at 15500
b) 10 weeks EMA placed at 15600
Bank Nifty Outlook
– The weekly value action formed a Doji candle with a decrease higher-low as contrary to our expectation the index failed to produce a breakout above last seven weeks variety (35800-34000) and extended the consolidation amid worldwide volatility
– Buying demand emerged from the decrease band of the last seven weeks variety highlights presence of powerful assistance about 34000 levels. Going ahead, we anticipate the index to hold above 34000 levels and witnessed a gradual pullback in the coming weeks towards the upper band of the variety placed about 35800 levels.
– The index has witnessed a shallow retracement as it has retraced just 50% of its May rally (32115-35810) more than previous seven weeks highlighting strength and a larger base formation.
– We advise to capitalize the existing breather as an incremental obtaining chance in high quality significant and mid-cap banks as the general structure remains positive
– The index has assistance base at 34000 levels being the confluence of the following technical observations
– The decrease band of the last seven weeks’ consolidation variety placed about 34000 levels
– The increasing 20 weeks EMA is also placed at 34000 levels
– Among the oscillators the weekly stochastic is sustaining above its nine periods typical therefore validates positive bias in the index in the coming weeks
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please seek the advice of your monetary advisor ahead of investing.)
ICICI Securities Limited is a SEBI registered Research Analyst obtaining registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/advantageous ownership of 1% or more securities of the topic corporation, at the finish of 22/04/2021 or have no other monetary interest and do not have any material conflict of interest. I-Sec or its associates may well have received any compensation towards merchant banking/ broking services from the topic corporations pointed out as customers in preceding 12 months