Nifty Outlook: Equity benchmark wrapped up the quiet monthly expiry week on a flat note, settling at 24176, down 0.3%. However, the real momentum stayed with mid and small caps as both indices endured their northbound journey by clocking fresh all-time highs, up ~0.5%, said Dharmesh Shah, Technical Head- Vice President, ICICI Securities.
Sector leadership shifted seamlessly to Pharma and Metal, while IT staged a strong rebound in IT. On the flip side, FMCG continued to underperform the benchmark, the market expert said.
- Nifty consolidated in a narrow range throughout the week and settled on a flat note. As a result, weekly price action resulted in a high wave candle carrying higher high-low, indicating prolonged consolidation.
- The index has marginally settled around the four months rising trend line which has been majorly held despite host of negativities around geopolitical concerns. From short term perspective, defending past two week’s low (~24000) would keep pullback options open towards 24600. Failure to do so would result in extended correction wherein strong support is placed around 23600 as it is placement of 50% retracement of Apr-Aug rally (22182-24774).
- Structurally, past five months trading activity has been confined in entire March month’s trading range (24989-22284). Such prolonged range contractions are rare which systematically set the stage for a directional move. Hence, as long as index holds swing low of 23600, we believe buy on dips structure remains intact
- Past two decades of historical data suggest that September has been the volatile month. However, such volatility has paved the way for direction move in subsequent months
- Smallcap index has logged an impressive ~35% rally off April low and reclaimed its all time high after 18 months. The historical data suggest that this is the initial leg of multi-year secular bull run rather than an overextended technical move. We believe that current up move has laid the foundation for a secular up move.
Shah’s bullish outlook on the broader market is anchored by following key observations:
a) Major corrections of ~35% or more have historically marked the beginning of a fresh market up-leg rather than the end of the broader bull cycle
b) Post such correction, uptrends have sustained for subsequent ~20–22 months on average, with significant rally in subsequent year
c) With current rally (~35%) only five months of its expansion, history suggest that we are just starting the secular up move, where the largest gains are yet to unfold
Brent crude snapped 2 weeks winning streak and formed a lower high-low. Continuation of corrective bias would fuel the momentum in the Indian equities.
- Monthly Auto sales number
- 2. Geopolitical Development
- Declining crude oil prices
Stock recommendations
1. BHEL: Past 14 weeks’ consolidation after a sharp rally appears to be taking shape of a bullish flag pattern. Breakout from the same would result in acceleration of momentum. Hence, we recommend buying in the range of 420-430 for the target of 470 and maintaining a stoploss
2. Wockhardt Pharma: The stock has staged a rebound after retesting its 12 years range breakout (at 2025), indicating a fresh entry opportunity with favourable risk-reward setup. The sharp 10-week upmove (1087-2422) pulled price significantly away from its 50-day EMA.
The recent 12 weeks of consolidation resulted into mean reversion wherein it retraced less than 50% of the prevailing upmove, highlighting underlying strength. Thereby, we recommend buying in the range of 1970-2032 for the target of 2274 and maintaining a stoploss of 1873.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
A mental health expert with 24 years of experience is the founder of Holistica World, with a deep understanding of the human mind and an enthusiasm for complete well-being, Dr. Shah has committed his life to assist people in achieving actual recovery and illness reversal. He established a special center in India that has changed innumerable lives by fusing contemporary medical science with complementary therapies like yoga, meditation, sound therapy, and Vedic science.
