In the week gone by equity benchmarks extended gains more than the second consecutive week regardless of elevated volatility spooked by surging second wave of COVID-19 across India. The Nifty concluded the week at 14823, up 1.3%. Broader marketplace somewhat outperformed as Nifty midcap, modest cap surged 1.3% and 2%, respectively. Sectorally, metal, pharma and IT remained in limelight although realty underperformed
Nifty technical outlook
Despite Monday’s gap down opening index managed to hold last week’s low of 14400 and staged a sturdy pullback through the week, displaying inherent strength. The weekly cost action formed a bull candle at identical lows of 14420, highlighting elevated acquiring demand as our acquire on dips technique worked nicely.
Going ahead, we reiterate our positive stance on the marketplace and count on Nifty to sooner or later head towards life-time higher of 15400 in the month of May 2021. However, move towards 15400 would not be linear in nature, as bouts of volatility owing to escalating issues more than COVID-19 2nd wave. Therefore, intermediate dips toward 14600 must be capitalised as an incremental acquiring chance in high-quality huge and midcaps amid progression of Q4FY21 outcome season
Key point to highlight through current secondary corrective phase is that, the index has witnessed shallow retracement, indicating robust cost structure that augurs nicely for next leg of up move. Over previous 6 sessions, Nifty has retraced 61.8% of preceding 5 session’s ~900 points up move, which is bigger in magnitude compared to the early March rally of 868 points.
Sectorally, we count on BFSI, Pharma, Metal to outperform although Consumption provide favourable threat-reward setup
Amongst Large caps, we choose Axis Bank, Bajaj Finserve, Cadila Healthcare, Ambuja Cement, Tata Steel, Bharti Airtel, Tata Motors although Mindtree, Alkem, Jindal Steel & Power, Supreme Industries, Escorts are anticipated to outperform inside midcap space
In line with our view, broader marketplace somewhat outperformed the benchmark as Nifty midcap and modest cap indices have resolved out of two months consolidation and clocked a fresh 52 weeks higher whereas Nifty is nonetheless 4% away. Therefore, we count on broader markets to endure ongoing relative outperformance amid progression of Q4FY21 outcome season
Structurally, we think index has formed a greater base about 14200 mark that has been held regardless of elevated volatility owing to concern more than second Covid-19 wave. We count on index to hold 14200 mark going ahead as it is confluence of:
a) Lower band of falling channel at 14200 b) one hundred days EMA placed at 14265 c) Last month’s low is placed at 14151
Bank Nifty outlook
The weekly cost action formed a bull candle with shadows in either path, indicating elevated volatility as the index is forming greater base above the 61.8% retracement of earlier two week up move (30405-34287).
We reiterate our positive stance with target of 34900 levels, in May’21 as it is the 61.8% retracement of the whole last two months decline (37708-30405). While in the upcoming truncated week any decline towards 32000-32400 would attract sturdy acquiring demand Key point to highlight is that more than the previous seven sessions the index has retraced just 61.8% of preceding seven sessions up move (30405-34287). The slower pace of retracement indicates a greater base formation.
The slower pace of retracement following the current up move of 3880 points, which is the bigger in magnitude compared to late February up move of 2256 points highlights robust cost structure and the present consolidation must be applied as an incremental acquiring chance in high-quality banking stocks
The index has quick assistance at 32000-31500 levels being the confluence of the last two weeks low and the 61.8% retracement of the present up move (30405-34287). While the main assistance is placed in the variety of 30500-30000 levels
The index has maintained the rhythm of not correcting more than 20% as witnessed considering the fact that March 2020. In the present situation, it rebounded following correcting 19% from the all-time higher (37708). Hence it gives favourable threat-reward setup for the next leg of up move
Among the oscillators, the weekly stochastic is in uptrend and placed at a reading of 52 hence supports the continuation of the pullback in the index in coming weeks
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please seek the advice of your monetary advisor just before investing.)
ICICI Securities Limited is a SEBI registered Research Analyst getting registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/helpful ownership of 1% or more securities of the topic organization, 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