By Dharmesh Shah
Equity benchmarks took a breather after two weeks of decline as inflation issues have been tamed down by decline in commodity costs and India VIX. The NSE Nifty 50 ended the week at 15699 up 2.7%. The Nifty Midcap, Smallcap comparatively underperformed the benchmark by gaining 2% and 1.6%, respectively. Sectorally, auto, consumption, IT remained in limelight whereas steel prolonged correction
Nifty Technical Outlook
The index began the session on a optimistic notice and progressively inched upward because the week progressed. In the method, index managed to carry final week’s low of 15183. The weekly value motion shaped a bull candle confined inside final week’s sizable bear candle, highlighting abating downward momentum.
Going forward, we anticipate NSE Nifty 50 to ultimately resolve previous falling channel (confining value motion since early June) is positioned at 15800 and progressively head in direction of 16200 ranges in coming weeks as it’s 61.8% retracement of June decline (16794-15183) coincided with higher band of adverse hole recorded on June 13 (16201-15878). On the draw back, the previous two weeks’ equivalent low of 15200 would act as instant help for the Nifty. In the method, we anticipate volatility to stay excessive owing to month-to-month expiry week. Thus, any dip in direction of 15400 must be used as a shopping for alternative.
Our constructive bias is additional corroborated by following evidences:
a) the sentiment indicators are approaching their bearish extremes. Historically, studying of share of inventory above 200 DMA beneath 15 signifies excessive pessimism within the markets that ultimately results in a technical pullback in subsequent weeks. Currently index recorded bearish excessive of 12 (which is lowest since March 2020) suggesting a powerful risk of a technical pullback in following weeks
b) Brent oil costs have breached the weekly rising development line indicating lack of momentum and we anticipate upsides to be capped within the 125-130 zone. Further decline in crude oil will present impetus for prolonged pullback
Amongst sector preferences, IT, BFSI are key sectors with beneficial threat/reward, whereas Auto and Capital items are anticipated to outperform.
We favor State Bank of India (SBI), Housing Development Finance Corporation (HDFC), Kotak Mahindra Bank, Tata Consultancy Services (TCS) , Maruti Suzuki India, ITC, Titan Company in massive caps whereas in midcaps we like KPIT Technologies, Federal Bank, AIA Engineering, NRB Bearings, Ashok Leyland, Automotive Axles, Bharat Electronics, Havells, Trent, Indian Hotel.
On the broader market entrance, in three situations over the previous decade, intermediate corrections within the Nifty Midcap, Small cap indices have been to the tune of 28% and 40%, respectively. At current, each indices have corrected 25% and 34%, respectively. Therefore, any additional correction is more likely to be brief lived amid oversold territory and would set the stage for a technical pullback in coming weeks
Bank Nifty Outlook
The Bank Nifty traded agency on Friday led by personal banks and PSU banks alike as each gained almost 2%. The pullback was broad primarily based which led Banking index to settle the week at 33627, up 2.2% thereby snapping three week dropping streak
The weekly value motion shaped a Bull candle with decrease shadow as supportive efforts emerged close to final week’s and March 2022 equivalent lows round 32300 ranges
Going forward, we anticipate Banking index to progressively resolve above previous two week’s excessive of round 33700 ranges and progressively head in direction of 34500 ranges in coming weeks which is increased band of bearish hole space (34483) and 61.8% retracement of previous three week decline (36083-32290)
In the approaching expiry week, volatility is more likely to stay elevated whereby shopping for demand is anticipated to emerge round 32500 ranges. Hence any dips in coming week in direction of 32800-32500 could also be used as shopping for alternative
The index has key instant help at previous two week’s equivalent lows and March 2022 lows positioned within the vary of 32100-32300.
Amongst momentum oscillators, weekly RSI has shaped a optimistic divergence with final week studying of 38 towards May 2022 studying of 37 whereas value made new low. Such divergence is indicating receding downward momentum and more likely to set off additional technical pullback in coming weeks
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please seek the advice of your monetary advisor earlier than investing.)
ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. It is confirmed that the Research Analyst or his kin or I-Sec should not have precise/helpful possession of 1% or extra securities of the topic firm, on the finish of 17/06/2022 or don’t have any different monetary curiosity and should not have any materials battle of curiosity. I-Sec or its associates might need acquired any compensation in direction of service provider banking/ broking providers from the topic corporations talked about as shoppers in previous 12 months.