By Dharmesh Shah
Equity benchmarks witnessed a roller coaster ride in the course of the preceding week amid volatile international cues. Nifty ended the truncated week at 16451, down .5%. However, broader marketplace indices extended profit booking as Nifty midcap, compact-cap lost 1%, 3%, respectively. Sectorally, IT, FMCG stayed at forefront even though financials and metal underperformed.
Technical Outlook
-Nifty surpassed our target of 16600 and steadily scaled to a fresh all-time higher of 16701 in the course of preceding week. However, profit booking from 16700 levels dragged index reduce. The weekly price tag action formed a higher wave candle carrying greater higher-low, indicating profit booking at greater levels.
-Our structural positive stance on Nifty steadily heading to 16900 in coming month remains intact, nevertheless in coming expiry week, Nifty is anticipated to undergo wholesome breather in 16100-16700 variety. Key point to highlight is that the Nifty has rallied ~1200 points more than previous 3 weeks that hauled weekly stochastic oscillator in overbought territory (placed at 90), indicating couple of days breather from right here on can’t be ruled out. However, such a breather would make marketplace wholesome and at some point pave the way to head towards 16900 in coming month as it is 161.8% extension of mid-June rally (15450-15962) projected from July higher of 15962. Thus, extended breather from right here on really should be capitalised to accumulate high quality stocks as we think powerful assistance is placed at 16100 levels.
-Sectorally, IT, Consumption and Telecom are anticipated to outperform even though selective getting anticipated in BFSI, Realty space
-On the stock front, we choose TCS, Asian Paints, Bajaj Finserv, Bharti Airtel, HUL, Titan even though in midcap space, we choose, Bata India, Chambal Fertilizer, Tata Elexi, Mahindra Life, Mahindra Logistics, Brigade Enterprise, JK Lakshmi Cement, VBL.
We think, the broader marketplace indices approaching maturity of their price tag and time smart correction. Since March 2020, price tag smart the Nifty midcap and compact cap indices have not corrected for more than 10%. Time smart, each indices have maintained the rhythm of not correcting for more than 3 weeks in a row. In existing situation as nicely, each indices corrected 6% & 8%, respectively from their all-time highs and approached its 50 days EMA. Thus, we anticipate broader marketplace indices to preserve the aforementioned rhythm by arresting ongoing corrective phase in coming week or two and undergo base formation above 50 days EMA that would set the stage for next leg of up move
Structurally, The formation of greater peak and trough on the bigger degree chart tends to make us confident to revise assistance base upward at 16100, as it is confluence of: (a) Positive gap recorded on 4th August (16131-16176) (b) previous two week’s low is placed at 16162.
Bank Nifty Outlook:
-The Nifty Bank snapped two weeks winning streak to settle reduce by more than 3%. The index contrary to our expectations breached the reduce band of the last 10 sessions variety (36300-35500) and closed the week at 35033 levels amid weak international cues.
-Going ahead, in the coming expiry week, Nifty Bank is anticipated to undergo extended consolidation in 34500-36300 variety therefore forming a base for the next leg of up move.
-Key observation is that the index given that April 2021 has not corrected for more than 3 to 4 consecutive sessions, with 4 sessions of decline currently behind us, we anticipate the index to preserve the rhythm and rebound in the coming couple of sessions
-Structurally, in the last 11 sessions the index has retraced just 61.8% of its preceding 5 sessions up move (34115-36219). A shallow retracement highlights a greater base formation and a positive price tag structure.
-The index has instant assistance base at 34500 levels as it is confluence of: (a) 80% retracement of the existing up move (34115-36317) placed about 34500 levels (b) increasing one hundred days EMA also placed about 34460 levels. 80% retracement of the existing up move (34115-36317) placed about 34500 levels increasing 20 weeks EMA also placed about 34509 levels.
-Among the oscillators, the weekly stochastic stay in uptrend and presently placed at a reading of 71 therefore supports the all round positive bias in the index.
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please seek advice from your monetary advisor just before investing.)
ICICI Securities Limited is a SEBI registered Research Analyst possessing registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/valuable ownership of 1% or more securities of the topic enterprise, 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 have received any compensation towards merchant banking/ broking services from the topic firms pointed out as consumers in preceding 12 months