Equity benchmarks BSE Sensex and NSE Nifty 50 took a breather after two weeks of sharp up move amid inflation worries and mixed global. The Nifty 50 concluded the week on a subdued note at 17153, down 0.8%. Broader market relatively outperformed as Nifty midcap and small cap gained 1% and 0.3%, respectively. Sectorally, Metal, IT, outshone while FMCG, Financials relatively underperformed during the week.

The Nifty started the week on a subdued note and extended lackluster momentum during the week as Nifty oscillated the week in the 400 points range. The weekly price action formed a small bear candle carrying a higher high-low, indicating breather after two week’s 11% up move. The ongoing healthy retracement has helped daily stochastic oscillators to cool off the overbought conditions. 

We believe, ongoing breathers will help index to form a higher base and gradually resolve above the upper band of the ‘Andrews’ Pitchfork’ (placed around 17300), leading to a gradual move towards 18000 in the coming month. In the process, we do not expect Nifty to breach the key support of 16800-16700. Therefore, extended breather should be capitalised on as an incremental buying opportunity as we believe buying on dips strategy would continue to work in favour of market participants. 

Our target of 18000 is based on following observation: 

a) 80% retracement of entire corrective phase since October 2021 (18604-15671)

b) downward slanting trend line drawn adjoining October-January highs (18604-18350)

Structurally, IT, and metal to outperform while realty, consumer discretionary, PSU would offer stock specific opportunities. Our preferred large cap picks are Infosys, Reliance Industries (RIL),  Bajaj Finance, JSW Steel, State Bank of India (SBI) while ABFRL, Cummins India, Persistent Systems, TAJ GVK, Graphite, Bharat Dynamics

The broader market indices have relatively outperformed the benchmark after forming a higher base above 52 weeks EMA that has set the stage to witness catch up activity with its large cap peers in coming weeks. Thus, focus should be on accumulating quality midcap stocks 

The formation of higher peak and trough on the weekly chart after forming a base above 52 weeks EMA signifies improving price structure that makes us confident to revise support base at 16800 as it is 61.8% retracement of recent up move (16470-17442), placed at 16842 

Bank Nifty Outlook

The Bank Nifty snapped a two-week winning streak and closed lower by 2.5% on a weekly basis. The weekly price action formed a bear candle as the index consolidated in a 1500 points range with corrective bias signaling profit booking after a sharp up move of 14% in the preceding two weeks. 

Index has witnessed profit booking after retracing 61.8% of the recent decline at 36600 in just two weeks. Going ahead, the overall bias remains positive and the current temporary breather should not be seen as negative, instead should be capitalized as buying opportunity in quality banking stocks. We expect index to resolve above last two week highs around 36600 levels and gradually head towards 38000 levels in the coming month being the 80% retracement of the February-March decline (39424-32155)

The short term support base for the index is placed around 34000 levels being the confluence of:

a) 50% retracement of the last two weeks up move (32155-36612) placed at 34300 levels

b) The bullish gap area of 10th March 2022 is also placed around 34000 levels

Among the oscillators the weekly stochastic has rebounded from the oversold territory and has recently generated a buy signal moving above its three periods average thus validates overall positive bias in the index