Equity benchmarks snapped previous 3 weeks decline and concluded the week at 14631, up 2%. Broader markets reasonably outperformed as Nifty midcap, tiny cap surged 3% and 4%, respectively. Sectorally, barring FMCG, all significant indices ended the week in green led by financials, metal and infra.
Technical Outlook
The weekly price tag action formed a higher wave candle, indicating elevated volatility as profit booking emerged soon after approaching the psychological mark 15000
The rejuvenation of upward momentum backed by enhancing marketplace breadth tends to make us confident to think the index would preserve the rhythm of price tag and time sensible maturity of correction and at some point retest life-time higher of 15400 in the month of May 2021. In the method, we count on index to hold the essential help threshold of 14200. Therefore, any cool off towards 14600-14500 variety would attract elevated shopping for demand which must be capitalised as an incremental shopping for chance in excellent big and midcaps amid progression of Q4FY21 outcome season
Key point to highlight is that, the existing up move (~900 points) is bigger in magnitude compared to early March rally of 868 points. The elongated up move signifies rejuvenation of upward momentum that augurs nicely for next leg of up move. Going forward we count on corrections to be shallower in nature major to a larger bottom formation.
Sectorally, we think outperformance in midcap to continue. Meanwhile, BFSI, Pharma, Metal and Consumption to stay in concentrate.
On the stock front, Axis Bank, Cipla, Ambuja Cements, Concor, L&T Infotech, SAIL are preferred big caps though in midcaps, Balkrishna Industries, Carborandum Universal, BEL, Mindtree, Radico Khaitan, Bata India, Tata Chemicals, Jindal Stainless are anticipated to outperform
The Nifty tiny cap index resolved out of previous two months consolidation and clocked a fresh 52 weeks higher, highlighting inherent strength. We count on, broader marketplace indices to endure their relative outperformance wherein tiny cap would witness catch up activity as Nifty midcap index is hovering at its all-time higher whereas tiny cap index is nevertheless 11% away from its life highs
Structurally, we think index has formed a larger base at essential help threshold of 14200, which we do not count on to breach. Hence dips must be capitalised as shopping for chance as level of 14200 is confluence of a) Lower band of previous two months falling channel placed at 14200, (b) one hundred days EMA placed at 14200, (c) Last week’s panic low is placed at 14151
Bank Nifty Outlook
Bank Nifty in line with our expectation witnessed a robust rebound for the duration of preceding week. Despite Friday’s profit booking the index closed larger by more than 3% on weekly basis
Going ahead, we count on the index to preserve the Price and Time sensible rhythm and progressively head towards 34900 levels in the coming weeks, as it is the 61.8% retracement of the whole decline (37708-30405). Hence, one must accumulate excellent banking stocks in the variety of 32000-31500 to ride next anticipated up move
Key point to highlight is that, the current up move (3880 points) is bigger in magnitude compared to late February up move of 2256 points. The elongation of up move signifies rejuvenation of upward momentum that augurs nicely for next leg of up move. Therefore, any short-term cool off must not be seen as damaging alternatively it must be capitalised to accumulate excellent banking stocks
The index maintained the rhythm of not correcting more than 20% as witnessed given that March 2020. In the existing situation it rebounded soon after correcting 19% from the all-time higher (37708). Hence it gives favourable threat-reward setup for the next leg of up move
The weekly stochastic is seen rebounding from the oversold territory and is placed at a reading of 40 as a result validates positive bias in the index
(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 business, 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 could have received any compensation towards merchant banking/ broking services from the topic firms described as clientele in preceding 12 months