By Dharmesh Shah The Nifty 50 index regained upward momentum and marched upward on four out of five sessions, highlighting improvement in momentum. As a result, weekly price action formed a bull candle carrying higher high, indicating resumption of up trend as index resolved above two weeks consolidation (17440-17000). Going ahead, we expect the Nifty to extend its northbound journey and head towards 18100 in April.
Our positive stance is based on following observations:
a) index has resolved out of bullish flag formation, leading to an acceleration of upward momentum. This overall development resulted in a bigger rally in magnitude (2032 points) compared to December-January rally (1940 points) that would further strengthen the price structure;
Read More:-CNG Prices Hiked Today, Rates Raised By Rs 2.5 Per Kg; Know How Much You Have to Pay
b) Bank Nifty has logged a resolute breakout from an inverted head and shoulder pattern, indicating bullish reversal. The rejuvenation of upward momentum in Banking stocks augurs well for traction in Nifty as financials carries 35% weightage in Nifty
c) Historically we have observed that oversold reading of sentiment indicators (percentage of stocks below 200-DMA) leads to decent up move subsequent months. In the current scenario, sentiment indicator has bounced from oversold territory with a reading of 45%, indicating extension of up move going ahead.
Our target of 18100 is based on following observations:
a) 80% retracement of entire corrective phase since October 2021 (18604-15671)
b) downward slanting trend line drawn adjoining October-January highs (18604-18350)
Read More: Petrol, Diesel Prices Hiked Today, Increased By Rs 8.40 in 14 Days; Check Fuel Rates
Sectorally, IT, BFSI and Metals are expected to do well on a relative basis while Capital goods and other rate sensitives may witness stock specific action. Our preferred large cap picks are Tata Consultancy Services (TCS), Reliance Industries Ltd (RIL), SBI (State Bank of India), Bajaj Finance, Tata Motors, Tata Steel while Amber, Bharat Electronics, Canara Bank, Mindtree, Chambal Fertiliser, Concor, NMDC in midcap.
Structurally, despite elevated crude prices and hawkish Fed stance, Nifty 50 index managed to form a strong base around 17000 mark and resolved higher, highlighting inherent strength. The breakout from consolidation confirms higher base that makes us confident to revise support base at 17200 as it is 80% retracement of current up move (17004-17703), placed at 17144 coincided with 50 days EMA. The broader market indices regaining upward momentum after forming a higher base above 52 weeks EMA. We expect, Nifty midcap and small cap indices to continue to catch up with its large cap peers in the coming weeks. Thus, focus should be on accumulating quality midcap stocks
Bank Nifty Outlook
The Bank Nifty witnessed a strong rebound during the previous week and closed higher by 5% tracking buoyant global cues amid peace talks between Russia and Ukraine, which lead to decline in VIX, crude oil prices and easing of fiscal worries. The weekly price action formed a strong bull candle which closed firmly above the last two weeks’ highs (36827) signaling strength and continuation of the positive bias.
The volatile consolidation of the last six weeks resembles an Inverse Head & Shoulder, a bullish reversal pattern on the daily charts. The index on Friday session has generated a breakout above the neckline of the Inverse Head & Shoulder pattern signaling reversal of the corrective trend and open upside towards 38100-38400 levels in the coming weeks being the measuring implication of the head & shoulder pattern breakout and 80% retracement of the February-March decline (39424-32155).
In the process any temporary breather should not be seen as negative, instead should be capitalized as buying opportunity in quality banking stocks as we do not expect the index to breach the support area of 36000 levels being the confluence of the:
a) 50% retracement of the previous week up move (35016-37209) placed at 36100 levels
b) The rising demand line joining the immediate lows of 8th March (32155) and 28 March (35016) placed around 36000 levels
Among the oscillators the weekly stochastic remain in uptrend currently placed at a reading of 69 thus supports the overall positive bias in the index
