By Dharmesh Shah
The broader industry indices outperformed the benchmark last week by gaining more than 1.2%, every and scaled to fresh all-time higher whilst equity benchmarks hovered inside a whisker of all-time highs as lacklustre movement prevailed more than a second consecutive week. The index settled on a flat note as Nifty eased .2% to finish the week at 15690. Sectorally, financials, metal, realty outperformed whereas losses in auto, IT, pharma capped gains
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Nifty Technical Outlook
– The equity benchmark began the week on a positive note even so failed to sustain above upper band of consolidation (15900) on the fourth occasion because June 2021. As a outcome, weekly cost action formed a bear candle majorly confined inside last week’s trading variety (15915-15635), indicating extended breather. The lack of more rapidly retracement on either side signifies prolonged consolidation (15900-15500) amid stock precise action.
– The Nifty is approaching maturity of cost/time smart correction, the shallow cost correction along with prolonged time consolidation signifies robust base formation at 15500. The ongoing volatility indicates that couple of weeks’ breather can not be ruled out, even so sooner or later we anticipate Nifty to resolve out of 4-week consolidation of (15500-15900) and head towards our target of 16100 in coming weeks. Key point to highlight is that through ongoing consolidation index retraced its May rally by just 38%, indicating shallow retracement. Time-smart, the index has not corrected for more than 3 consecutive weeks in a row because April 2020. In the existing situation, the index has currently corrected more than the previous two weeks. Thereby we anticipate it to keep the very same rhythm by arresting the ongoing corrective phase in coming weeks.
– The formation of subsequent greater lows through ongoing consolidation (15900-15500) exhibited obtaining demand at elevated help base. Therefore, dips need to be capitalised as incremental obtaining chance as we enter the Q1FY22 earning season.
– We remain positive on IT, BFSI, Metals, Auto and Infra as essential outperforming sectors going ahead
– Our preferred massive caps are Infosys, Bajaj Finserv, Axis Bank, Tata Steel, Ambuja Cements and Maruti Suzuki whilst, in midcaps we like Indoco Remedies, L&T Infotech, Dhampur Sugar, Jindal Stainless, Just dial, Siyaram Silk Mills, Minda Industries, Godrej properties and NCC.
– The broader industry indices comparatively outperformed the benchmark as Nifty midcap and little cap scaled to fresh all-time higher. We think, the broader industry indices have formed a greater base that has set the stage for next leg of up move. We anticipate broader industry to endure its relative outperformance in coming weeks
– Structurally, we think previous 5 week’s consolidation helped index to type a greater base at 15600-15500 zone, which we do not anticipate to be breached as it is confluence of:
a. 61.8% retracement of previous 4 week’s rally (15145-15915), at 15440
b. 10 weeks EMA placed at 15478
c. June 2021 low placed at 15450
Bank Nifty Outlook
– The Index began the week on a positive note but profit booking at the greater band of the last 5 weeks variety (35800-34000) saw the index gave up most of its weekly gains and closed marginally greater by .8%. The weekly cost action resulted in a little bull candle with a lengthy upper shadow whilst sustaining greater higher-lows indicating extended consolidation
– Going ahead, we keep our positive stance even so, a couple of weeks’ breather can not be ruled out. We advise to capitalize such breather as an incremental obtaining chance for up move towards 36200 levels in the coming weeks as it is the 80% retracement of the February – April 2021 decline (37708-30405)
– On a smaller sized period the index has witnessed a shallow retracement as it has retraced just 50% of its May rally (32115-35810) more than previous 5 weeks.
– Key observation is cost action has been contracting more than previous handful of sessions suggesting that breakout from this consolidation is approaching. We anticipate index to breakout on the greater side offered shallow retracement and robust cost structure
– The formation of greater higher-low in the weekly time frame provides us confident to revise the help base greater towards 34200-34500 being the confluence of the following technical observations:
a. The 80% retracement of the current up move (33908-35811) placed at 34290 levels
b. The worth of the increasing demand line joining important lows because May 2020 is placed about 34550
c. The increasing 50 days EMA is also placed at 34580 levels
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please seek advice from your economic advisor prior to 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/useful ownership of 1% or more securities of the topic enterprise, at the finish of 22/04/2021 or have no other economic 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 firms pointed out as customers in preceding 12 months