Technical & Derivatives Report
Once again on Friday, the bank index started with a gap up opening
and post some choppy moves after the RBI monetary policy
witnessed a strong positive momentum to end with gains of 2.83% at
23847. Post the recent low at 20400 the bank index has seen a
vertical rally in the last two weeks to gain around 2400 points. With
this strong upmove, the bank nifty broke one after another resistance
with ease and has now closed above key 61.8% retracement levels
(25232 - 20404) and above 200SMA for the first time after seven
months. Initially, the upmove was led with selective heavyweight
counters however post the RBI policy we witnessed a broad-based
rally where the PSU banks as well showed strong momentum. Going
ahead after such sharp moves we may see some intraday decline
however the momentum is strongly gripped by bulls and such dips
should be used to enter long preferably in stock specific. As far as
levels are concerned, immediate support is placed around 23570 -
23300 whereas resistance is at 24200 - 24380 levels.
Key Levels
Support 1 – 23570 Resistance 1 – 24200
Support 2 – 23300 Resistance 2 – 24380
Exhibit 1: Nifty Daily Chart
We have seen a spectacular comeback by the bulls after the recent
hiccup towards 10800. From the next day onwards, the market just
took off with the help of a few heavyweight themes. Initially, it was the
IT space that took the charge and lifted markets higher from the critical
levels along with some participation from the banking space. In fact,
the momentum kept accelerating in the week gone by; courtesy to
some excellent news flow in the IT giant, TCS to lift the overall
sentiments for other peers as well. Addition to this, HDFC twins joined
the party and had stellar moves throughout the week. Any robust rally
in the market is incomplete without the contribution of the banking
space. On Friday, post the RBI policy, banking stocks attracted
tremendous buying interest to eventually end the week at a new seven
month high for Nifty above the 11900 mark.
In the last couple of weeks’ rally, global markets played the major part
as we are seeing some gravity defying moves despite some in between
uncertainty. Initially, in our recovery mode, we were a bit skeptical but
in the first half of the week, we had to admit the miss and eventually
started participating in the move. The way Nifty surpassed the 31st
August high of 11794 with some authority and is now within the
kissing distance of 12000, the positivity is likely to extend further.
Importantly, the banking space which was following the benchmark in
the entire recovery finally showed some dominance on Friday. This
factor is very much in favor of the bulls, which may provide impetus for
the extended rally. Now, the only missing factor is the participation
from the broader market. If we look at the Nifty Midcap index in the
last 7-8 sessions, they remained muted throughout and only a handful
of heavyweight themes lifted the market higher.
Exhibit 2: Nifty Bank Daily Chart
Hence, if Midcap index breaks out from recent congestion, it will be
then considered as a healthy rally. Let see how things pan out in the
next couple of sessions. Now as far as levels are concerned, the base
has shifted higher and the previous resistance area of 11700 – 11450
should now be treated as a strong support. On the flipside, we are very
much close to the psychological mark of 12000. The moment it’s taken
out, we may see a steady move towards 12200 – 12400 levels. Since,
the banking index is back to 200-day SMA on the daily chart and the
way it closed with complete gush in the space, a move beyond 24000
would provide strong support to the benchmark index. However, we
would like to highlight that since the move is extremely swift, anytime
we can see some intraday profit booking and hence, one needs to
position accordingly and be very fussy in stock selection.
.Key Levels
Support 1 – 11820 Resistance 1 – 12000
Support 2 – 11780 Resistance2 – 12200