By Dharmesh Shah
Equity benchmarks concluded a risky week on a destructive word monitoring world volatility. The Nifty ended the week at 16411, down 4%. Broader markets indices comparatively underperformed the benchmark as Nifty midcap and small cap misplaced 4% and 6.5%, respectively. Sectorally, all main indices led to pink weighed by financials, auto, realty
NSE Nifty 50 technical outlook
The index began the truncated week with a destructive hole and regularly drifted southward as an unscheduled price hike announcement by RBI adopted by Fed price hike dented the market sentiment. As a consequence, opposite to our expectation Nifty breached key assist of 16800 accelerating additional decline amid weak world cues and spike in volatility. The weekly value motion fashioned a large bear candle carrying decrease high-low, indicating prolonged correction.
Going ahead, key assist is positioned at 16100 ranges being 80% retracement of March rally. Only a decisive shut under 16100 would lead Nifty 50 index to prolonged correction in the direction of the March low of 15700. However, we observe that the previous 4 weeks’ corrective transfer hauled each day and weekly stochastic oscillators in excessive oversold territory (at the moment positioned at 8 and 16, respectively). In earlier events, throughout CY18-20, after approaching such decrease studying under 20, markets have witnessed technical pullback.
Thus, we advise merchants to chorus from creating aggressive brief positions within the present extremely risky state of affairs. Instead, one ought to capitalize dips to assemble portfolios in high quality shares in a staggered method. Meanwhile, speedy upsides are capped at breakdown space of 16800
Historically, over the previous 20 years, on 16 out of 20 events regardless of a transitory breach (not better than 5%) of the 52-week EMA (at the moment 16600) index has generated respectable returns in subsequent 3 month and 6 months. In the present state of affairs 5% from 200 days EMA will mature at 15700.
Key monitorable in coming weeks will likely be cool off in home and world volatility which has inverse correlation with equities. Thus cool off in volatility coupled with oversold circumstances will pave the way in which for technical pullback.
On the sectoral entrance, BFSI, Telecom, IT sectors provide beneficial risk-reward proposition
The broader market indices behaved in tandem with benchmark. Currently, Nifty midcap, Nifty small cap indices are hovering round 52 weeks EMA. We consider extended consolidation from hereon would assist the weekly stochastic oscillator to chill off amid ongoing Q4FY22 incomes season. Going forward, the formation of upper high-low on the weekly chart would affirm pause in downward momentum
Bank Nifty Outlook
The Nifty Bank index witnessed sharp decline and closed decrease by 4% final week amid weak world cues and unscheduled price hike by RBI. Index opposite to our expectations, breached the assist space of 35000 and within the weekly value motion fashioned a large bear candle with a decrease high-low signaling continuation of the corrective decline.
Key assist for the index is positioned at 33500 ranges being the 80% retracement of the whole March up transfer. Only a decisive shut under 33500 would result in prolonged correction in the direction of the March low of 32155. Immediate upsides are capped at 36000 ranges.
Index has stiff hurdle round 36000 ranges being the confluence of final Thursday excessive and the 38.2% retracement of present decline (38765-34353).
The formation of decrease high-low on the month-to-month chart signifies prolonged correction. However, the index has witnessed a shallow retracement of its previous up transfer and has already taken 5 weeks to retrace simply 61.8% of its previous 4 weeks up transfer (32156-38765). A shallow retracement alerts the next base formation. The index has assist round 33500 ranges as it’s confluence of:
a) 80% retracement of the whole March 2022 up transfer (32155-38765) positioned at 33500 ranges
b) bullish hole space of tenth March 2022 can also be positioned round 33700 ranges
Among the oscillators the weekly stochastic is at the moment approaching oversold territory with a studying of 20 signaling a pullback doubtless within the 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 kinfolk or I-Sec shouldn’t have precise/useful possession of 1% or extra securities of the topic firm, on the finish of 21/01/2022 or don’t have any different monetary curiosity and shouldn’t have any materials battle of curiosity. I-Sec or its associates may need acquired any compensation in the direction of service provider banking/ broking providers from the topic corporations talked about as purchasers in previous 12 months.