By Dharmesh Shah
In the week gone by equity benchmarks extended gains more than second consecutive week as index scaled to fresh lifetime higher of 15455 amid buoyant international cues. Nifty settled the week at 15436, up 1.7%. Broader market place performed in tandem with benchmark the benchmark as Nifty Mid cap and modest cap rose 1.2% and 2%, respectively. Sectorally, financials, IT and auto outshone even though pharma and metal took a breather
Nifty technical outlook
– In line with our view (‘Monthly Technical Strategy’- May), Nifty resolved greater and surpassed the lifetime higher of 15400. The weekly price tag action formed a substantial bull candle carrying greater higher-low, indicating acceleration of upward momentum.
– We anticipate, Nifty to resolve greater and head towards our revised target of 15700 in June, as it is 123.6% external retracement of February-April correction (15432-14151). Our constructive stance on the market place is based on following observations:
a) Key point to highlight is that, index has completely retraced previous 10 weeks corrective move (15432-14151) in just 5 weeks. Faster pace of retracement signifies structural improvement that augurs properly for next leg of up move
b) The present up move (1050 points) off May low of 14416 is bigger in magnitude compared to last two up moves of ~900 points in last 3 months. The elongated up moves followed by shallow retracement supported by enhancing market place breadth signifies robust price tag structure
– After ~900 points rally more than previous 10 sessions, short-term breather from greater levels can’t be ruled out. However, such breather should really be capitalised to accumulate top quality stocks to ride next leg of up move. Meanwhile, Nifty modest cap index is anticipated to challenge life highs
– Sectorally, BFSI, IT, Infra and Consumption are anticipated to lead the rally. Auto and Metals provide favourable danger-reward
– We favor Infosys, Kotak Bank, Reliance Industries, Dmart, M&M, Titan in huge caps even though, Mindtree, Grindwell Norton, EIH, Endurance, Bata India, Thermax, are preferred in Midcap category
– Nifty midcap and modest cap indices endured their winning spree and clocked fresh 52 weeks higher. The outperformance in the broader market place indices has been backed by enhancing market place breadth as at present ~85% of index elements are trading above their 50 days EMA compared to April reading of ~60%. We anticipate broader market place to outperform and modest cap index to challenge the all-time higher which is just 3% away
– Structurally, the formation of greater higher-low signifies elevated getting demand that tends to make us confident to revise help base at 14900 as it is confluence of:
a) 80% retracement of previous 2 weeks rally (1472-15470), at 14875
b) 50 days EMA is placed at 14825
Bank Nifty outlook
– The index gained for the second consecutive week and closed firmly above psychological 35000 levels. The weekly price tag action formed a bull candle with a reduced shadow, indicating continuation of the up move and a getting demand at reduced levels close to the current breakout location and the April higher (34287)
– Going forward, we reiterate our positive stance with target of 36200 in coming month as it is the confluence of the 80% retracement of the whole last 3 months corrective decline (37708-30405) and the price tag parity with preceding up move (30405-34287) as projected from the current trough of 32115 signalling upside towards 36200 levels
– Key observation is that the index due to the fact April has maintained the rhythm of not correcting for more than two to 3 sessions. During preceding week, also the index rebounded immediately after two sessions of breather. Extended rally and shallow correction highlights positive price tag structure.
– As pointed out in earlier edition the index has lately registered a breakout above the falling provide line joining key highs of the last 3 months as can be seen in the adjacent chart highlighting resumption of the key up trend
– The formation of greater higher-low on the weekly chart signifies elevated getting demand that tends to make us confident to revise the help base greater towards 34000 levels as it is confluence of:
a. The 38.2% retracement of the present up move (32115-35463)
b. The current breakout location and the April higher (34287).
– Among the oscillators, the weekly stochastic stay in uptrend and is at present placed at a reading of 76 hence supports the continuation of the positive bias in the index in the coming weeks
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please seek the advice of your economic advisor ahead of 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/useful ownership of 1% or more securities of the topic firm, 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 possibly have received any compensation towards merchant banking/ broking services from the topic firms pointed out as consumers in preceding 12 months