Index is expected to trade with positive bias while maintaining higher high -low – ICICI Direct

Technical Outlook

* In line with our view, index resolved higher and surpassed 200 days EMA. As a result, index approached at upper band of past four months downward slanting channel placed at 17600. The weekly price action formed a strong bull candle carrying higher high-low, indicating continuance of positive bias

* The formation of higher high-low backed by improving market breadth makes us confident that index will resolve higher and gradually head towards 18100 in April 2023. In the process, bouts of volatility owing to global development can not be ruled out. However, any dips from here on should be capitalized to accumulate quality stocks in a staggered manner. Our positive view on the market is further validated by following observations:

* a) The current pullback of 810 points is strongest in magnitude since life highs recorded in December 2022, indicating structural improvement

* b) On the momentum indicator front, Rate of Change indicator is at 5 month high (on multiple parameters), indicating revival in upward momentum

* c) On larger time frame, monthly stochastic around 25 in March was at its bearish extremes making a strong case for meaningful gains over next three months

* d) Current up move was backed by robust market breadth as 80% components of Nifty 500 universe have given positive returns during this period, while percentage of stocks above 200dma has improved from a low of 32 in March to current reading of 43 marking stark improvement

* e) VIX and trajectory of yields, domestically and globally, pointing towards favourable environment for risk assets especially equities

* f) US dollar index trending down with lower high low on monthly charts, a positive for EM equities. Further breakdown below 100 would lead to acceleration of inflows

* Sectorally, BFSI, Auto, IT, Capital goods and Infra, PSU to lead the rally

* On stock front, in large cap HDFC Bank, Bajaj Finance, SBI, L&T, ITC, Infosys, Maruti, DLF, BEL are in focus while in midcap AB Capital, Sundaram Finance, MGL, HG Infra, Lemontree, ABFRL, RK Forge, Timken remain in focus

* We expect broader markets to witness catch up activity as Nifty midcap and small cap indices have surpassed above their past two weeks high, indicating pause in downward momentum and augurs well for acceleration of upward momentum in coming weeks

* Structurally, the formation of higher high-low on the weekly chart makes us confident to revise support base at 17100 as it is 61.8% retracement of recent pullback (16828-17638) coincided with the positive gap area of 17126-17204 recorded on 31st March 2023

*In the coming session, index is likely to open on a flat to positive note tracking firm global cues. We expect, index to endure its northbound journey while maintaining higher high-low formation. Hence, use intraday dip towards 17620-17655 to create intraday long positions for target of 17739 with a stoploss of 17583


Nifty Bank: 41041

Technical Outlook

* The weekly price action formed a bull candle with a higher high -low signalling continuation of the up move

* The index on expected lines approached higher band of falling channel that encompass past four -month corrective phase at 41200 . Going ahead, we expect index to break past this short -term hurdle over next few sessions, leading to further acceleration towards 42000 levels in April 2023 being the confluence of the high of February 2023 and 61 . 8 % retracement of the entire corrective decline (44151 -38613 ) . Use dips as a buying opportunity with elevated support at 40000 levels • Bank Nifty/Nifty ratio line continues to trend higher and sustain the above major breakout area signalling continuation of the outperformance

* The index has support at 40000 levels being the confluence the bullish gap up area of 29th March 2023 and the 50 % retracement of the last three weeks pullback (38613 -41274 )

* The weekly stochastic has generated a buy signal moving above its three periods average thus supports the continuation of the current pullback in the coming weeks

*In the coming session, the index is likely to open on a positive note amid firm global cues . Index is expected to trade with positive bias while maintaining higher high -low . Hence after a positive opening use intraday dips towards 41100 -41180 for creating long position for the target 41430 , maintain a stoploss of 40990



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