TECHNICAL STRATEGY : NIFTY HEADED FOR NEW HIGHS, MIDCAPS TO CATCH UP

•Equity benchmarks defied the broad scepticism and their northbound journey enduring during October. On expected lines, the index resolved higher after forming a higher base and surpassed our target of 18100

•We reiterate our constructive stance and expect the Nifty to challenge the all-time high of 18600. Eventually head towards 18900 by December 2022. In the process, bouts of volatility owing to global uncertainty cannot be ruled out. Thus, dips should be capitalised on as incremental buying opportunities. Our positive stance on the market is based on the following observations:

•a) breakout from 12 month’s falling trend line confirms conclusion of corrective bias, in turn, suggesting resumption of the primary up trend

•b) historically, over the past two decades, Q4 returns for the Nifty have been positive (average 11% and minimum 5%) on 15 out of 21 occasions (70%). History favours buying dips from here on

•c) on the structural front, BSE PSU index logged a resolute breakout from decade long downward slanting channel, indicating structural turnaround

•d) India VIX, which gauges market volatility, has recorded five month’s range breakdown and is trading around 16, indicating low risk perception among market participants

•e) Indian equities continued to relatively outperform their global peers, showing inherent strength

•f) US Dollar/INR pair retreated from upper band of long term rising trend line placed at 83.30 while Dollar index has faced stiff resistance from decade long resistance trend line.

•Broader market indices are rebounding after forming higher base above falling channel breakout area coinciding with 52 week’s EMA. We expect to see catch up activity against benchmark in coming weeks amid progress of Q2FY23.

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