By Dharmesh Shah
In the week gone by equity benchmarks entirely recouped last week’s losses and ended the week on a positive note at 15175, up 3.4%. Broader markets regained momentum and outperformed the benchmark by gaining 4%, each. Sectorally, barring FMCG, all other indices ended in green led by financials, auto and realty.
Nifty technical outlook
– The index started the week on a positive note and gradually reclaimed 15000 mark after two months consolidation (14900-14400) breakout, highlighting structural improvement. The weekly price action formed a strong bull candle carrying higher high-low, indicating resumption of primary up trend.
– In line with our view (discussed in the ‘Monthly Technical’ report) of Nifty heading towards 15400 in the month of May, index resolved out of past two months consolidation (14900-14400) and now expected to challenge the life highs of 15400 in the coming expiry week.
– The elongated up moves followed by shallow price correction highlights robust price structure that makes us confident to revise our target to 15700 for the month of June 2021, as it is 123.6% external retracement of Feb-April Correction (15432-14151). Therefore, any cool off from hereon should be capitalised as incremental buying opportunity in quality large cap and mid-caps.
– Sectorally, BFSI, Auto, and Consumption are expected to outperform while Infra space provides favourable risk/reward setup
– On the stock front, HDFC, IndusInd Bank, SBI, Reliance Industries Ltd, Mahindra & Mahindra, Titan Company are preferred large caps while Ashok Leyland, Kalyani Steel, Vguard, Ambika Cotton, PNC infra, Action Constructions, EIH, Trent & Hikal are preferred within midcap space
– Broader market relatively outperformed the benchmark wherein Nifty midcap and small cap indices recorded a fresh 52 weeks high. The broader market outperformance highlights inherent strength of the market that augurs well for durability of the ongoing up trend. We expect, broader market to accelerate their relative outperformance wherein catch up activity would be seen in small cap index, as Nifty midcap index is hovering around all time high whereas small cap index is still 5% away from life highs
– Structurally, the formation of higher high-low on the weekly chart signifies elevated buying demand that makes us confident to revise support base at 14600 as it is confluence of:
a) 61.8% retracement of past here weeks up move (14151-15175), at 14700
b) Past two week’s low placed at 14592
Bank Nifty outlook
– The weekly price action formed a strong bull candle with a higher high-low as on expected lines buying demand emerged around the 32000 levels being the 61.8% retracement of its April 2021 up move (30405-34287)
– Key observation is that the index has registered a breakout above a falling supply line joining major highs of the last three months indicating resumption of the up move.
– We expect the index to maintain positive bias and head towards 36200 levels in the coming month as it is the confluence of the 80% retracement of the entire last three months corrective decline (37708-30405) and the price parity with previous up move (30405-34287) as projected from the recent trough of 32115 signalling upside towards 36200 levels
– Index in the smaller time frame has witnessed a faster retracement of the last falling segment as 11 session’s decline (34287-32115) was completely retraced in just five sessions. A faster retracement in less than half the time interval signals a robust price structure
– The formation of higher high-low on the weekly chart signifies elevated buying demand that makes us assured to revise the support base higher towards 33000 levels as it is confluence of
a. The 61.8% retracement of the current up move (32115-34694)
b. The rising 50 days EMA is also placed at 33130 levels
– Among the oscillators, the weekly stochastic remain in uptrend and is currently placed at a reading of 70 thus supports the continuation of the positive bias in the index in the coming weeks
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please consult your financial advisor before investing.)
ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 22/04/2021 or have no other financial interest and do not have any material conflict of interest. I-Sec or its associates might have received any compensation towards merchant banking/ broking services from the subject companies mentioned as clients in preceding 12 months