By Dharmesh Shah
Equity benchmarks endured their winning streak more than the fourth consecutive week buoyed by easing lockdown restrictions in the nation. Nifty concluded the week at 15799, up .8%. Broader industry fairly outperformed as Nifty midcap and smaller cap gained ~3%, every. Sectorally, IT, pharma, PSU outperformed even though financials took a breather
Nifty technical outlook
– The index continued with its record setting spree more than third consecutive week as Nifty clocked a fresh all time higher of 15835. The weekly cost action formed a bull candle with smaller reduced shadow, highlighting elevated acquiring demand as intra-week dips had been purchased into. On anticipated lines, smaller cap index scaled to fresh all time higher supported by more rapidly retracement as nine quarters decline retraced in just 5 quarters, indicating structural improvement
– Going ahead, we anticipate the index to extend its northbound journey and progressively head towards our earmarked target of 16100 in June 2021. Our constructive view is backed by following thesis:
a. The formation of larger higher supported by enhancing industry breadth highlights robust cost structure. Currently 94% elements of Nifty 500 index are trading above their 50 days EMA compared to May reading of 86%, indicating broader industry participation
b. Strong international cues have been giving impetus as majority of international indices continue to exhibit strength and hit lifetime highs. Domestic industry is witnessing robust positive correlation with its international peers
– We think, move toward 16100 would be in a zig-zag manner as bouts of volatility owing to overbought situation of weekly stochastic oscillator (presently placed at 97) can not be ruled out. Therefore, any dip from right here on really should be capitalised on as incremental acquiring chance in high quality huge cap and midcaps as we think robust assistance for the Nifty is placed at 15400. Our earmarked target of 16100 is based on:
a. Price parity of post spending budget rally (13597-15432), projected from April low of 14151, at 16055
b. Past two months consolidation (15140-14150) breakout target at 16120
– Sectorally, IT, Infra and Consumption are anticipated to lead even though BFSI and Auto gives favourable danger-reward setup
– On the stock front, we stay constructive on TCS, Tata Motors, SBI, Ashok Leyland, SAIL, Titan Company, Cipla even though, in midcaps we like DCB Bank, Glenmark Pharma, Mindtree, Intellect Design, Mahindra Logistics, Godrej Properties, Greaves Cotton, SKF India
– In line with our view, broader industry indices fairly outperformed the benchmark and scaled to fresh all time higher. The outperformance has been backed by enhancing industry breadth as presently typical 92% index elements are trading above their 50 days EMA compared to May reading of 85%, indicating inherent strength that augurs properly for durability of ongoing up move
-Structurally, the formation of larger higher-low highlights elevated acquiring demand that tends to make us confident to revise assistance base at 15400 as it is confluence of:
a. As per alter of polarity idea, earlier resistance of 15400 would now act as a important assistance
b. 61.8% retracement of previous 3 week’s rally (15145-15835), at 15409
c. Last week’s low is placed at 15374
Bank Nifty outlook
The index snapped a 3 weeks up move and closed reduced by .6% on weekly basis amid profit booking following a sharp up move of more than 11% in just 3 weeks. The weekly cost action formed a smaller bear candle with a reduced shadow highlighting a breather following current sharp up move.
– Going ahead, we think the present breather really should be made use of as an acquiring chance for up move towards our target of 36200 in the month of June 2021 as it is the confluence of the 80% retracement of the whole last 3 months corrective decline (37708-30405) and the cost parity with preceding up move (30405-34287) as projected from the current trough of 32115 signalling upside towards 36200 levels
– In a smaller sized time frame the index has witnessed a shallow retracement as it has currently taken eight sessions to retrace just 38.2% of its preceding eight sessions up move (33274-35714). A shallow retracement highlights a robust cost structure and a larger base formation
– We do not foresee the index breaching the critical assistance region of 34400-34000 as it is confluence of the following technical observations:
a. The 38.2% retracement of the present up move (32115-35810) placed at 34400
b. The worth of the increasing demand line joining lows of April 2021 and May 2021 is placed about 34400
c. The current breakout region and the April higher (34287).
d. The increasing 50 days EMA placed at 34005 levels
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please seek advice from your economic 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/useful ownership of 1% or more securities of the topic corporation, 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 have received any compensation towards merchant banking/ broking services from the topic firms talked about as consumers in preceding 12 months